Texas and Alabama state securities authorities issued an immediate cease and desist order to a virtual, Cyprus-registered casino called Sand Vegas Casino Club. “Stop a fraudulent investment scheme connected to metaverses,” the corporation has been instructed to do.
Sand Vegas Casino Club, Martin Schwarzberger, and Finn Ruben Warnke were charged with illegally providing nonfungible tokens (NFTs) to fund the creation of virtual casinos in metaverses by the Texas State Securities Board on April 13.
Sand Vegas allegedly provided 11,111 NFTs in order to support its metaverse casinos. Those who bought Gambler NFTs and Golden Gambler NFTs were promised a part of the casino’s future revenues. Owners of Gambler NFTs may earn between $1,224 and $24,480 each NFT per year, according to Sand Vegas’ forecasts, while Golden Gambler NFTs holders might earn between $6,480 and $81,000 per NFT per year.
The listing price for Gambler NFTs was between 0.23 ETH (about $744.38) and 777.77 ETH ($2.5 million) on April 9, while the price for Golden Gambler NFTs was between 2.13 ETH ($6,793) and 169 ETH ($547,000).
The respondents asserted that their NFT offerings were not securities and hence were not subject to securities regulations, according to the order. According to the document:
“The Respondents are also creating a scheme to impede any attempt to regulate the Gambler NFTs and Golden Gambler NFTs […] They are misleading purchasers by saying that they can simply escape securities legislation by employing illusory features or other nomenclature.”
Texas authorities’ approach seems to have the potential to start a bigger trend
Sand Vegas is unable to proceed with its NFT sales since it is not registered to sell securities in the states of Texas and Alabama. Texas authorities’ approach appears to have the potential to start a bigger trend. According to Joe Rotunda, enforcement director of the Texas State Securities Board, his agency is working with other state securities regulators to investigate similar offerings and plan enforcement actions in the “hot area” of NFTs.