In a landmark move for DraftKings Inc., a lawsuit over its NFT platform known as Reignmakers will be settled for $10 million. In March 2023, the lawsuit argued that DraftKings did not register their NFTs as securities which meant they broke federal and state securities laws. It illustrates how NFTs are being closely watched by regulators and assessed under the current rules.
Description of the lawsuit and who is involved:
In the case, Justin Dufoe claimed that DraftKings’ NFTs fit the definition of investment contracts based on the Howey Test which would make them securities under the law. The plaintiffs pointed out that purchasers invested in a common enterprise, hoping to profit from the efforts of others which matches the requirements of the test. Judge Casper ruled that the plaintiffs had provided enough evidence to argue that DraftKings’ NFTs are securities. According to the court, the court said DraftKings was responsible for the NFT marketplace and that its promotion and management influenced the worth of the NFTs.
Settlement Details:
The court gave a preliminary okay to pay up to $10 million in February 2025 to individuals who dealt with DraftKings NFTs from August 11, 2021, until the last judgment is given. Lawyers and other fees, any admin expenses and making payments to approved class members will all be part of the settlement fund. Those who are part of the class have to send a valid claim form no later than July 21, 2025, to be compensated. Each claimant will get a sum determined by their recognized loss which is the amount paid for the NFTs less what they already received from selling them or from using the marketplace shutdown offer.
Implications for DraftKings and the NFT Market:
By settling, DraftKings demonstrates the overall difficulties companies meet when dealing with the Rules, regulations and standards for digital assets. An NFT marketplace for the company was launched through centralized efforts. It was discontinued in July 2024 because of problems with the company’s legal status. Because of the shutdown, all the NFTs became inaccessible. So, its performance remains inadequate which disappoints investors even more. The legal review of NFTs in the U.S. is growing and this case is just one example where there are more situations where courts view certain NFTs as securities, making people wonder about Ensuring that in the industry. This case is not the only example in this field. These types of lawsuits keep coming up such as cases about NBA Top Shot NFTs and Dapper Labs, where lawsuits have been brought over NFTs that constitute securities. Such incidents point out the need for accurate procedures and legal standards. The need for compliance in all sectors is similar to cases where law enforcement makes mistakes which explain the outcomes of mistakes in the application of procedure.
Conclusion:
DraftKings’ $10 million settlement is a major development for the area where digital and sports intersect. Asset and securities law refers to the same area of law. This story is meant to show businesses in the NFT what might go wrong. It is important to do thorough legal work and obey regulations and standards. Because laws are always changing, businesses need to stay up to date. Quick to deal with the challenges of offering digital assets.
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Read related cases in our Consumer & Product Lawsuits section.
