Alabama, Texas Regulators Take Aim At Sand Vegas Casino NFTs

Alabama, Texas Regulators Take Aim At Sand Vegas Casino NFTs

Just as gambling law has struggled to keep up with technology, securities law experiences the same problems around the Metaverse and NFTs. One of the recent examples of that is a dispute over Sand Vegas Casino Club – which, yes, is different than Las Vegas Sands Corp.

Securities regulators in Alabama and Texas have sent orders for the co-founders to stop selling NFTs to support the construction of the metaverse casino. How this situation plays out could impact the novel world of gambling in the metaverse moving forward.

Sand Vegas Casino draws attention

Last week, the Alabama Securities Commission sent a cease-and-desist letter to Sand Vegas Casino and its co-founders. The letter accuses them of illegally selling securities without a license.

The Commission says Sand Vegas is selling NFTs as an investment stake in the casino. The allegations include promises that the NFT buyers will profit from the casino’s operation once it is open.

Specifically, the Commission alleges the casino has told NFT buyers they will be entitled to a share in half of the casino’s profits. The letter goes on to give some of the numbers in the Commission’s view.

“On April 9, 2022, the listing price for a Sand Vegas Casino Club NFT ranged from 0.23 Ether (valued approximately $744.38) to 777.77 Ether (valued approximately $2.5 million). Respondents are representing that Sand Vegas Casino Club NFT owners will earn between $102 and $6,750 per NFT per month or $1,224 and $81,000 per NFT per year.”

The issue, therefore, isn’t that these individuals are building a metaverse casino. The problem is that they have been selling NFTs as investment properties with assurances that purchasers will earn a return.

Thus far, there has been no public response from either of the co-founders. Casino gaming in the metaverse is a topic that even those who wish to operate within regulatory landscapes are wrapping their minds around.

How do metaverse casinos work?

Metaverse casinos essentially work the same as casinos in the physical world operate. You visit the property, play games, and leave. There are two big differences, however.

First, metaverse casinos operate on cryptocurrencies instead of US dollars. Also, instead of physically traveling to the casino, your avatar in the metaverse represents you.

These differ from traditional online casinos in that online casinos still use US dollars as the form of currency. Additionally, there’s no integration of digital avatars to the same extent.

Another big difference is that in the states where they operate legally, real-money online casinos are heavily regulated. That isn’t the case with metaverse casinos. To date, anyway.

Will states license metaverse casinos someday?

That’s just part of a broader question right now about to what extent the federal and state governments will regulate metaverse activities as a whole. Currently, governments are still trying to decide how they will treat NFTs.

For example, a lawsuit between Nike and StockX currently poses the question to a federal court about whether NFTs are products themselves or simply receipts for products when it comes to trademark issues.

It could be years yet before state governments are ready to tackle the concept of metaverse casinos. For the time being, though, it’s clearly not advisable to advertise NFTs as investment opportunities in them.

Author: Tyler Gutierrez