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Metaverse casino Slotie was hit Thursday with four emergency cease-and-desist orders from Texas, New Jersey, Kentucky, and Alabama for allegedly violating gambling laws.
Slotie uses the internet to solicit investors to participate in illegal gambling operations in the metaverse, a digital world where participants can interact, purchase products, and gamble online. Slotie is currently based in Georgia and began operating in 2021. It advertises to investors that its non-fungible tokens (NFTs) are a ticket to the “largest and fastest growing online casino network on the blockchain.”
NFTs are digital assets that show own one-of-a-kind virtual art, music, or in Slotie’s case, part of their metaverse casino. Since their inception, more than 10,000 Slotie NFTs have been sold to the public.
The Slotie website also claims to be the “Las Vegas of the metaverse,” as it is currently hosted by Sandbox, one of the largest metaverses available. It has raised over $10 million in Series A funding from a venture capitalist group in the first quarter. Slotie Junior NFTs, their new project, are unique ERC-721 tokens created exclusively on the Ethereum blockchain.
The states accused Slotie of defrauding investors and ordered it to immediately stop the sale of its NFTs to retail investors. All four states allege Slotie’s owners have solicited traders to participate in unlawful gambling.
One of the reasons cited in the cease-and-desist orders is that while their NFTs are securitized, they have not provided investors with essential contact information, such as a business address, founder’s names, telephone numbers, or email addresses.
The order also alleges Slotie failed to comply when asked to disclose assets, liabilities, total revenue, and other financial information. The order also states that Slotie must stop selling to investors until the security is registered correctly in all four states and risks a fine of up to $10,000 if it fails to violate that order.
Joe Rotunda, the Texas state securities board director, told CNBC that while the metaverse provides legitimate business opportunities, it can “bear significant undisclosed risks,” which can sometimes “leave investors virtually broke.”
On Thursday, Slotie seemed to allude to the cease-and-desist orders on Twitter.
“Sloties has positioned our community for long-term growth!” read a post at 9:15 a.m. ET.
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