Non-fungible token (NFT) marketplace OpenSea will no longer allow the Sand Vegas Casino Club to trade Gambling Apes NFTs, saying Alabama and Texas regulators consider them to be unregistered securities, CoinDesk reported Friday (April 22).
Gambling Apes NFT holders can participate in the profit sharing from the processes of the casinos, according to the report. In an update on its Discord channel, project leader BlackyJefferson21 said the team is working with lawyers and Alabama and Texas state officials in “good faith” to talk about the next steps.
The team “intends to comply with all laws and regulations but ‘was previously not subject to any registration requirements and had not been contacted by any governmental organization regarding registration requirements,'” another admin said in the report.
Sand Vegas had forecasted proceeds of up to $ 24,480 from the Gambler NFTs and up to $ 81,000 per year from the higher-end Golden Gambler NFTs.
“It appears to be the main issue with the‘ Gambler ’NFTs is that there was an explicit expectation of profit sharing, which appears to run afoul of the SEC’s Howey test,” said Christopher LaVigne, a partner in the litigation and arbitration team of international law firm Withers, in the report.
If the Securities and Exchange Commission (SEC) determines an NFT marketplace is providing a trading platform for securities, it will likely consider the marketplace as an unlicensed exchange, he said in the report.
Earlier this month, securities regulators in Texas and Alabama ordered the Sand Vegas Casino Club to stop selling NFTs.
Read more: Virtual Casino Company Ordered to Stop Selling NFTs by Texas, Alabama Securities Regulators
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 and erroneously told potential buyers the tokens were not securities, the Texas State Securities Board said in a statement.