Texas Regulator Targets Metaverse Casino NFTs

Texas Regulator Targets Metaverse Casino NFTs

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Texas has apparently put the intersection of NFTs and online gambling in its crosshairs.

On Wednesday, the Texas State Securities Board issued an Emergency Cease and Desist Order against Sand Vegas Casino Club, Martin Schwarzberger, and Finn Ruben Warnke, accusing them of “illegally offering NFTs to fund the development of virtual casinos in metaverses.”

According to the announcement, Sand Vegas Casino Club and the two individuals are offering 11,111 Gambler NFTs to develop metaverse casino gaming in popular metaverses platforms such as the Sandbox, Decentraland, Infinity Void, and NFT Worlds.

The Board said the respondents “are not registered to sell securities in Texas, and the Gambler NFTs and Golden Gambler NFTs are not registered or permitted for sale in Texas.”

“The metaverse casinos reportedly act as real casinos except they operate in virtual worlds,” regulators said in a presser. “Gamblers, acting through avatars, can enter the metaverse casinos and play poker and other games using cryptocurrencies.”

Purchasers of the NFTs are said to be able to profit from these operations.

“Not only do they become owners of the metaverse casinos, but they also purportedly share in half of the profits generated from the metaverse casinos — including profits from gambling and profits from the sale of digital assets representing drinks and cigarettes.”

On April 9, 2022, Texas said, the listing price for Gambler NFTs was between 0.23 ether or around $744.38 and 777.77 ether or around $2.5 million. The listing price for Golden Gambler NFTs was between 2.13 ether or around $6,793 and 169 ether or around $547,000.

Respondents were accused of “touting the lucrative profitability” of Gambler NFTs and Golden Gambler NFTs. According to the order, they are estimating owners of Gambler NFTs will receive between $102 and $2,040 per NFT per month or $1,224 and $24,480 per NFT per year. The Golden Gambler NFTs purportedly provide considerably more profitability. Respondents are estimating that owners of the Golden Gambler NFTs will earn between $540 and $6,750 per NFT per month or $6,480 and $81,000 per NFT per year, according to the order.

Respondents are said to be advertising the NFTs through social media. Respondents claimed their social media was hacked in January 2022, Texas said.

“The hacker allegedly used a bot to spoof a platform for minting NFTs and misappropriated 50 ether — valued at around $154,000 on the incident date — from followers.”