Online casino stops selling NFTs over regulatory issue
NFTs have insinuated almost every aspect of our lives, from arts and games to intellectual rights. However, there are no legal guidelines to indicate what can and cannot be an NFT, and some take advantage of these loopholes to evade legal limitations. One such incident caught the attention of US securities regulators last week. State regulators and Texas and Alabama have ordered a virtual casino in Cyprus to stop their NFT sales.
Sand Vegas Casino Club, a virtual casino that explores the possibilities of the metaverse in gaming, has been accused of illegally offering titles to its users. Sand Vegas founders Martin Schwarzberger and Finn Ruben Warnke arranged the sale of 11,111 NFTs to fund the casino’s metaverse integration plan. This collection included the Gambler and Golden Gambler periods which promised buyers a portion of the casino’s annual profits. Apparently, the founders of the casino offered buyers up to 81,0000 a year.
State regulators quickly discovered the sale and promptly issued a cease and desist order. The casino has been accused of fraudulent and unregistered sale of securities through NFT. After the Texas State Securities Board order, OpenSea, Polygon’s largest NFT marketplace, removed Sand Vegas Casino NFTs from the marketplace.
Yet many believe that state or federal guidelines regarding cryptocurrencies and NFTs mostly lurk in the gray area. The interpretation of these guidelines often confuses those establishing their business in DeFi. This issue of Sand Vegas is strikingly similar to the famous Ripple Vs. SEC lawsuit. The issue continues to grow in importance as the SEC has not issued any formal guidance on whether NFTs become securities in specific cases. Still, the small case appears to have rekindled interest among regulators as they prepare to take concrete action on the matter.
According to Joe Rotunda, director of enforcement at the Texas State Securities Board, state securities regulators should meet sooner or later to discuss possible solutions and commission investigations into security offerings in DeFi. It should be noted that this is the first time that a virtual casino has received a cease and desist order from regulators, and it proves that the government is keeping a watchful eye on the activities of the crypto ecosystem. On the other hand, carpet pulling activities have also increased recently. A month ago, two men were arrested for defrauding $1.1 million via NFT deals. Recently, an adult actress scammed her followers about $1.5 million in the name of an NFT sale.