Chris Prentice

WASHINGTON (Reuters] -Securities regulators in Texas and Alabama, respectively, on Wednesday issued an order to an online casino operator not to sell non-fungible coins (NFTs). The firm had been accused of illegally selling unregistered securities as well as defrauding customers.

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. The Texas State Securities Board stated in a statement that they also misled potential buyers by telling them the tokens weren’t securities.

The regulators stated that Sand Vegas had promised its Gambler NFTs buyers they would be able to share in the virtual casino profits. They were predicting that it could make as high as $81,000 annually.

Sand Vegas, and the co-founders couldn’t be reached for comment at this time.

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 charged last month with defrauding NFT buyers in the amount of $1.1 million.

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,

OpenSea is the world’s largest NFT marketplace. A spokesperson said that the company had stopped Sand Vegas tokens being sold, bought, and transferred because they were not in compliance with the service terms.

Joe Rotunda is the enforcement director for the Texas State Securities Board. He said that the board has seen a lot of securities offerings within the metaverse.

He told Reuters that “this is a very hot region.” “We have been coordinating between states in order to examine the offers and, if needed, plan enforcement actions.”