U.S. State securities regulators demand virtual casino firms not to sell NFTs.
WASHINGTON: Securities authorities in Texas and Alabama ordered an online casino developer to stop selling non-fungible tokens (NFTs) on Wednesday, alleging that the company was distributing unregistered securities and deceiving the public.
Sand Vegas Casino Club, domiciled in Cyprus, and co-founders Martin Schwarzberger and Finn Ruben Warnke allegedly raised funds for virtual casinos in the metaverse by selling 11,111 NFTs in a “high-tech fraudulent securities offering.”
In addition, they allegedly misled potential buyers into believing the tokens were not securities, according to the Texas State Securities Board.
According to the regulators, Sand Vegas guaranteed buyers of its Gambler and Golden Gambler NFTs a part of virtual casino winnings, with annual profits of up to $81,000.
Sand Vegas is attempting to comply with the Securities and Exchange Commission (SEC) and state regulators, according to Schwarzberger.
“We are completely convinced that we can resolve this dilemma and, in doing so, maybe pave the door for future NFT projects,” he said.
The cease-and-desist injunction appears to be the first about internet-based virtual environment platforms, dubbed the “metaverse” by some.
It also represents a new area for U.S. authorities attempting to regulate NFTs, which are blockchain-based tokens that represent assets such as digital art.
Two guys were arrested and accused of defrauding NFT buyers out of $1.1 million last month.
Even though this recent case is minor, state measures frequently pique the curiosity of federal regulators.
As a result, investor interest in NFTs has soared. However, the Securities and Exchange Commission (SEC) has yet to issue formal guidelines on whether they may be classified as securities in some cases.
Because the collections violated the platform’s service guidelines, a spokeswoman for OpenSea, the largest NFT marketplace, stated the firm had disabled Sand Vegas tokens’ buying, selling, and transferring.
The Texas State Securities Board’s enforcement director, Joe Rotunda, said the regulator had noticed several securities offerings in the metaverse.
He told Reuters, “This is a hot area.” “We’re working together across states to evaluate the offerings and, if required, take enforcement action.”
She is a freelance blogger, writer, and speaker, and writes for various entertainment magazines.