The metaverse casino Slotie was barred from selling NFTs to its members in four states after the platform failed to provide eligible proof of profits and could not meet securities requirements. The four states that have issued a cease-and-desist order to Slotie include Texas, Kentucky, New Jersey, and Alabama.
The Georgia-based gambling company runs more than 150 online casinos, selling NFTs to players, claiming they will guarantee ownership rights over these virtual casinos, ultimately offering players a percentage of Slotie’s profits.
Slotie NFTs Found to be in Violation of State Laws, Company Issues Unregistered Securities
Slotie has issued a total of 10,000 rare NFTs, with rarer NFTs ensuring a bigger share of the company’s profits. This is not the first NFT project of this kind, as several similar platforms also offer NFT holders a portion of the entity’s revenue. However, NFTs issued by Slotie were found to be unregistered securities, which meant they were considered a violation of state laws.
The four states that have submitted cease-and-desist orders requested Slotie to immediately stop the sale of its NFTs. If the gambling company fails to meet the requirements of the orders within the period of 30 days, Slotie’s operators may face financial penalties of up to $10,000 as well as possible prosecutions, with two to ten years of imprisonment also being part of the possible punishment.
In addition to issuing NFTs as securities that have not been registered, Slotie also failed to provide verifiable information such as the address of the company, the names of the founders of the project as well as their email addresses and phone numbers. Another key piece of information the platform failed to provide includes the company’s assets and liabilities, revenue, and other information of financial nature.
While the Texas securities board director, Joe Rotunda, acknowledged the potential economic benefits of the metaverse, he warned that this type of platform has become a popular tool used for fraudulent activities.
Slotie Still Has Not Responded to Accusations Directly
Despite the orders issued by the four states, Slotie still has not responded to the accusations. The only indirect reply to the case was a few tweets by the company, explaining how Slotie works and what it offers to its NFT holders.
According to Jeremy Goldman, an NFT attorney specialist, it comes as no surprise that Slotie has become the first target of securities regulations. Slotie claims that the holders of its NFT can enjoy a passive income thanks to the revenue that the platform and its partners have generated. According to Goldman, the reason why Slotie has been struck with securities violations by the four states is the involvement of gambling, which is a tightly-regulated sector in the states.
It is yet to be revealed what the effect of the regulatory actions taken against Sloties is going to be, sparking similar discussions such as the federal regulation of blue-chip NFT projects.