DraftKings Agrees to Settle Class Action Lawsuit Over NFT Sales
DraftKings has agreed to resolve a class action lawsuit, filed in federal court on Wednesday, which alleges that it violated federal securities laws when selling NFTs on its marketplace.
The settlement, which was negotiated by both parties “at arm’s length,” will see the company pay $10 million in cash to a settlement fund that will cover legal fees, settlement costs, and compensation to each participating class member, defined as “persons or entities who purchased, acquired, sold, disposed of, owned, held, used, or otherwise transacted in NFTs in a DraftKings account.”
The motion for preliminary approval emphasized the “inherent risks and unavoidable delays in ongoing litigation,” noting that the settlement is “fair, reasonable, and in the best interests of the settlement class.”
The lawsuit was initially filed by plaintiff Justin Dufoe on behalf of himself and others who purchased or acquired DraftKings NFTs, seeking damages based on the allegation that the NFTs are unregistered securities.
The fantasy sports company previously sought to dismiss the case but was denied by a U.S. District Court judge in Massachusetts, leading to the immediate shutdown of its NFT fantasy sports product, DraftKings Reignmakers.
Reignmakers offered users the opportunity to participate in fantasy sports contests similar to the company’s daily fantasy sports products, utilizing collectible NFTs to fill rosters featuring players from the PGA Tour, UFC, and NFL on the Polygon blockchain.
The company reported total trading volume exceeding $280 million for that product, facilitating over 10 million transactions on its marketplace in the process.
At the time of the product’s shutdown, users were given the option to redeem their Reignmakers NFTs for cash or transfer them to self-custody wallets. According to the page dedicated to Reignmakers on the DraftKings website, players who accepted cash payments for the game pieces will have their NFTs burned if they do not transfer them to self-custody wallets by October 31, 2024.
The DK team stated on the page, “In keeping with our spirit of innovation, we ventured into the NFT-based sports realm with Reignmakers and achieved a great deal in such a short time.”
The final approval hearing for the settlement is expected to take place later this year.
DraftKings Inc. stock (DKNG) traded on the Nasdaq has seen a 1.1% increase in the past 24 hours, rising over 19% year-to-date.
James Rubin
