The metaverse is a set of virtual worlds where people live, work and play.
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Regulators in four states simultaneously filed emergency cease-and-desist orders Thursday against virtual casino Slotie.
States law enforcement officials allege Slotie’s owners were soliciting investors online to participate in an illegal gambling operation in the metaverse, a digital world where participants can interact with each other, purchase products and gamble. State securities boards in Texas, Kentucky, New Jersey and Alabama accused Slotie of defrauding investors and ordered it to immediately halt the sale of its non-fungible tokens, or NFTs, to retail investors.
NFTs are blockchain-based digital assets that designate ownership of virtual art, music, or in this case, proprietorship of a metaverse casino to the holder of the NFT. According to the order, 10,0000 Slotie NFTs were sold to the public.
Slotie, which is based in the country of Georgia, began operating in October 2021, according to the order. On its website, it said its NFTs “are your ticket into the largest and fastest-growing online casino network on the blockchain.”
Although the metaverse project was selling securitized NFTs, the order said it failed to provide purchasers with essential information such as the business address of the company or its founders, with a telephone number or an email address.
The order further alleges the respondent failed to disclose its assets, liabilities, revenue and other financial information related to its operations of the metaverse casinos.
Joe Rotunda, the Texas state securities board director, said while the metaverse does provide legitimate business opportunities, it also can provide a new forum for fraudsters looking to scam the public.
“The latest metaverse investment products — NFTs that purport to provide passive income — often bear significant undisclosed risks,” he said in a statement. “These risks are often significant, and investing in virtual realities can leave investors virtually broke.”
As a result of the order, Slotie must immediately cease and desist from selling to investors until the security is properly registered. If the founders violate the order, they are subject to a fine of up to $10,000. They also have 31 days to request a hearing on the issue.