The Metaverse has once again come under fire for its deregulated landscape after four states banned casino Slotie for alleged illegal gambling activities.
Texas, New Jersey, Kentucky, and Alabama have all issued cease-and-desist orders to Slotie, in order to stop the sale of its non-fungible tokens (NFTs).
Players in the metaverse were using the NFTs effectively as casino coins to play games and gamble online.
But it is alleged that this was practically a scam, with players having little chance of recouping their wagers. What’s more, there was a serious risk of minors being attracted to the scheme.
What Is Slotie?
Slotie operates as a virtual casino, in which players buy and set its NFTs and then use them as virtual casino chips to gamble with on a wide range of casino games.
Players are able to do this in the Sandbox metaverse, where around 10,000 of its ERC-721 tokens are traded.
The problem is that many states see this as a direct form of gambling, and illegal at that. Slotie is based in Georgia and launched in October 2021, and within six months had raised $10m in investment from an unnamed venture capital group.
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.
— FINCH Labs 📍 SF (@fnchlabs) October 21, 2022
States Clamp Down On Slotie
According to CNBC, the four states have each issued cease-and-desist orders as they deem Slotie’s activities to breach gambling laws. Slotie must stop selling its NFTs, which must be properly registered before entering each state’s individual markets.
Slotie will have to pay a $10,000 fine if it breaches the orders, but can file for a hearing regarding the case within a month.
One of the big accusations against Slotie is that it is failing to provide transparency to its investors. The public are unable to access info such as who owns the company, who the founders are, etc. Slotie hasn’t even provided financial information such as its liabilities, revenues and assets.
All this is worrying for potential Slotie NFT purchasers, as it could well be the case that the value of each token is worth less than expected.
Unfortunately the metaverse remains largely unregulated and uncharted when it comes to applying the law to its transactions. Blockchain technology and the free trade of NFTs is appealing to many, but with that comes responsibility around consumer protections.
