In a rare case of NFT blacklisting, agency activity against Vegas Sands has led to OpenSea dropping of some of its NFTs.
“NFT marketplace OpenSea has suspended the trading of ‘Gambling Apes’ NFTs from the Sands Vegas Casino Club after regulators in Texas and Alabama ordered trading to halt as they were categorized as unregistered securities,” writes Sam Reynolds at Coindesk this morning. “Cyprus-based Sand Vegas Casino Club said that holders of the Gambling Apes NFTs can participate in profit-sharing from the proceeds of the casinos.”
We reported on U.S. SEC responses to these blockchain assets last week, but now we have acquiescence from the biggest NFT market around.
Christopher LaVigne, a partner at the Withers law firm, offered some context in Reynolds’s coverage, noting the above language as a direct statement of NFT profit participation, which is a prohibition according to the SEC, since it makes the asset into a “security.”
“It appears 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,” LaVigne said.
A spokesperson, Reynold reports, said that Vegas Sands “was previously not subject to any registration requirements, and had not been contacted by any governmental organization regarding registration requirements,” but clarifies that the company wants to resolve the issue.
Here’s some background on the specifications of these assets from Milica Zivic at Beat the Fish.
“(Vegas Sands) is a virtual casino that consists of over 100,000 unique gamblers (the NFTs) which have been created from over 200 traits,” Zivic writes. “These NFTs are stored as EFT-721 tokens on the Ethereum blockchain and purchasing one gave the buyer a stake in the company. According to the casino, NFT buyers would be given 50% of the casino’s profits which could bring them up to $81,000 per year. They would also receive other perks like free entry into tournaments, as if they were VIPs at any other casino. The model was used to fund the creation of an online casino in the metaverse. According to nft-stats.com, the average price of a Sand Vegas NFT was about $930. Over the course of the past week, the brand made over $55,000 on the sales of NFTs.”
It certainly looks like the promise of profit sharing is there. On the other hand, the SEC has been locking horns with Ripple over its XRP token for months based on a similar contention and in that case, it looks like the SEC might be losing. Stay tuned.
