DraftKings has agreed to a $10 million settlement to resolve a category motion lawsuit difficult its NFT Marketplace and Reignmakers product. The lawsuit, which accused the corporate of providing unregistered securities, had been ongoing for practically 18 months earlier than each events reached a decision.
The authorized dispute, initiated by lead plaintiff Justin Dufoe in March 2023, centered on allegations that DraftKings’ NFTs functioned as securities underneath U.S. legislation however weren’t correctly registered. Dufoe filed the case within the U.S. District Court for the District of Massachusetts, naming not solely DraftKings but additionally CEO Jason Robins, North America President Matt Kalish, and Chief Transformation Officer Jason Park as defendants.
Legal Challenges and Marketplace Shutdown
DraftKings tried to dismiss the lawsuit, arguing towards the claims, however the effort was unsuccessful. In July 2024, U.S. District Judge Denise J. Casper dominated towards the movement to dismiss, stating that the allegations had benefit underneath the Howey Test, a authorized benchmark used to find out whether or not monetary devices qualify as funding contracts.
Following the courtroom’s determination, DraftKings shut down its NFT Marketplace and its fantasy gaming product, Reignmakers. The firm attributed the closure to “recent legal developments,” although traders criticized the transfer, notably as some NFT holders have been supplied solely partial compensation for his or her losses.
The determination to discontinue the platform additionally led to extra authorized disputes. The NFL Players Association (NFLPA), which had partnered with DraftKings to create NFTs that includes participant likenesses for Reignmakers, filed a separate lawsuit in August 2024 over unpaid royalties. That dispute was later settled in January 2025, forward of the Super Bowl.
Settlement Terms and Class Member Eligibility
Dufoe has now filed a movement for preliminary approval of the $10 million settlement, which goals to compensate DraftKings clients who transacted in NFTs on the platform. According to courtroom filings, the settlement class contains all people or entities that bought, offered, held, or in any other case used DraftKings NFTs between August 11, 2021, and the ultimate date of judgment.
The settlement fund can be distributed to class members based mostly on a predetermined allocation plan and also will cowl legal professional charges, litigation bills, and administrative prices. Court paperwork point out that administrative bills can be capped at $300,000, roughly 3% of the full settlement quantity.
Estimates recommend that round 175,000 people might qualify for compensation. Additionally, Dufoe has requested a service award of as much as $50,000 for his function in pursuing the case on behalf of the category.
Impact on the NFT Industry and Future Regulations
This case provides to the rising authorized scrutiny surrounding NFTs and their classification underneath U.S. securities legal guidelines. The lawsuit towards DraftKings highlights the broader regulatory uncertainties that NFT platforms proceed to face, with authorized precedents evolving as courts weigh in on whether or not digital property ought to be handled as securities.
Attorney Sarah Flohr, representing Dufoe, quoted by SBC Americas, emphasised the importance of the settlement, stating, “This outstanding result was reached only after a thorough investigation of the claims, fully briefing defendants’ motion to dismiss, discovery in advance of the mediation, an all-day mediation, which involved rigorous and extensive negotiations before a neutral third party and continued confirmatory discovery and information sharing.”
The courtroom has but to grant preliminary approval for the settlement, which might allow formal discover to be despatched to class members. If permitted, the settlement might affect future compliance methods for NFT platforms, as firms navigate the evolving regulatory panorama.
