Virtual Casino Company Ordered to Stop Selling NFTs by Texas, Alabama Securities Regulators

Securities regulators in Texas and Alabama on Wednesday (April 13) have ordered Cyprus-based online casino developer Sand Vegas Casino Club to stop selling nonfungible tokens (NFTs), saying the company was offering unregistered securities and defrauding the public, according to a Reuters report.

Sand Vegas and co-founders Martin Schwarzberger and Finn Ruben Warnke allegedly offered 11,111 NFTs in a “high-tech fraudulent securities offering” to raise money for virtual casinos in the metaverse, the report, and erroneously told potential buyers the tokens were not securities, the Texas State Securities Board said in a statement.

Sand Vegas also promised buyers of its Gambler and Golden Gambler NFTs they would share in virtual casino profits, forecasting proceeds of as much as $81,000 each year, regulators told Reuters, which couldn’t reach Sand Vegas or its founders for comment.

It’s the latest example of NFTs finding themselves in the legal crosshairs. Last month, two men were arrested and charged after allegedly scamming NFT buyers for $1.1 million.

NFT marketplace OpenSea has listed Sand Vegas tokens, according to Wednesday’s order. OpenSea did not respond to Reuters’ request for comment.

Joe Rotunda, enforcement director at the Texas State Securities Board, told Reuters his agency has found several securities offerings in the metaverse.

“This is a hot area,” he told Reuters. “We are coordinating among states to investigate the offerings and plan enforcement actions if necessary.”

Related: OpenSea Teams with MoonPay for NFT Credit Card Payments

Earlier this month, OpenSea teamed up with MoonPay to enable direct credit card payments for the purchase of NFTs, opening the doors to investors that don’t own cryptocurrency.

People who want to buy, sell, trade, and collect NFTs can pay directly with Visa, MasterCard, American Express, Apple Pay, Google Pay and other methods, without first having to convert to specific cryptocurrencies, a MoonPay spokesperson told Block Crypto. The payment methods can be used for all sales on the OpenSea platform, including initial mint, primary sales and secondary sales.