Four U.S. state regulators order metaverse casino startup Slotie to stop the sale of fraudulent NFTs

The metaverse became the latest buzzword late last following the announcement that Facebook has changed its corporate to Meta to reflect its focus on the metaverse, a term originally coined by Neal Stephenson in the dystopian novel “Snow Crash” three decades ago.

Since then, the metaverse has grown in popularity as billions of dollars are poured into blockchain and nonfungible tokens (NFTs). Investors are not alone. Scores of startups have also jumped into the space hoping to get their own share of the market. One of those startups is Slotie, the developer of a new metaverse NFT slot game that merges DeFi and gambling through the use of virtual casinos.

Slotie, which is based in the country of Georgia, claims users can earn passive income from 150 casinos. Now, the startup has found itself in hot water in the United States after soliciting investors online to participate in an illegal gambling operation in the metaverse.

On Thursday, four U.S. state regulators ordered Slotie to halt the sale of NFTs. Regulators in the four states simultaneously filed emergency cease-and-desist against Slotie.

State securities regulators 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.

In a statement, Texas State Securities Board said:

“State securities regulators filed coordinated enforcement actions to stop sales of NFTs by an organization in the country of Georgia. The actions accuse Slotie NFT (“Slotie”) of illegally and fraudulently selling nonfungible tokens, often referred to as NFTs, to raise capital for online and metaverse casinos. The actions were filed by the Alabama Securities Commission, Kentucky Department of Financial Institutions, and the Texas State Securities Board.”

The regulators also accused Slotie of disclosure failure. According to its website, Slotie 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 state’s law enforcement officials also alleged that Slotie’s owners were soliciting investors online to participate in an illegal gambling operation in the metaverse.

“The actions accuse Slotie of issuing 10,000 Slotie NFTs that are similar to stock and other equities. The Slotie NFTs purportedly provide investors with ownership interests in the casinos and the right to passively share in the profits of the casinos. The rarity of each Slotie NFT, however, purportedly determines the amount of passive income payable to the owner. Slotie NFTs that contain rarer traits allegedly provide more passive income than NFTs consisting of more common traits,” Texas State Securities Board added.