State securities regulators order virtual casino firm to stop selling NFTs -Breaking
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© Reuters. FILE PHOTO: A visitor is pictured in front of an immersive art installation titled “Machine Hallucinations — Space: Metaverse” by media artist Refik Anadol, which will be converted into NFT and auctioned online at Sotheby’s, at the Digital Art Fair, in Chris Prentice
WASHINGTON, (Reuters) –Securities regulators from the U.S. state of Texas and Alabama ordered Wednesday that an online casino developer stop selling non-fungible tokens (NFTs). They claimed the company was offering illegally unregistered securities and defrauding public.
Sand Vegas Casino Club in Cyprus, along with co-founders Martin Schwarzberger (from Finland) and Finn Ruben Wanke (from Texas), allegedly offered 11,111 NFTs to finance the construction of virtual casinos in metaverse. In a statement, the Texas State Securities Board claimed that the tokens they offered were also not securities.
The regulators stated that Sand Vegas had promised its Gambler NFT buyers they would be able to share in the virtual casino profits. They were predicting profits of up to $81,000 per year.
In an email, Schwarzberger stated to Reuters that Sand Vegas was working towards compliance with the Securities and Exchange Commission and state regulators.
He stated that he was confident in his ability to solve the situation, and perhaps even set the standard for future NFT projects.
According to common usage, the cease-and halt order is the first to relate to the internet-based virtual world platforms. This is a breakthrough for U.S authorities looking to crack down on NFTs (blockchain-based tokens) that can represent assets like digital art. Two men were arrested last month for allegedly swindling NFT buyers with a total value of $1.1million.
Even though this case was relatively minor, federal regulators often take notice of state actions. Investor interest in NFTs has increased dramatically, and although the Securities and Exchange Commission(SEC) does not offer formal guidance as to whether or not they can be classified securities in certain cases, it is encouraging.
OpenSea spokesperson stated that they had blocked Sand Vegas tokens from being bought, sold and transferred by the firm because of violations of their service terms.
Joe Rotunda (enforcement director, Texas State Securities Board) said that they have spotted several securities offerings in metaverse.
He said that this was a “hot area.” “We coordinate among the states to investigate these offerings and plan enforcement actions, if required.”
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