DraftKings Reaches $10 Million Settlement in NFT Lawsuit
DraftKings has agreed to a $10 million settlement to resolve a class-action lawsuit related to its NFT marketplace. The lawsuit, which lasted approximately 18 months, accused the company of selling unregistered securities through its NFT platform, violating both state and federal securities laws.
Details of the Lawsuit and Settlement
The class-action suit alleged that DraftKings operated its DK Marketplace as an unregistered securities exchange, allowing users to buy, sell, and trade NFTs that functioned as investment products. The plaintiffs argued that these NFTs met the Howey Test criteria, which determine whether an asset qualifies as a security under U.S. law.
A significant turning point in the case came when Judge Denise J. Casper denied DraftKings’ motion to dismiss the lawsuit. This ruling allowed the case to proceed, ultimately pressuring the company to shut down its NFT marketplace. DraftKings cited “recent legal developments” as the reason for the closure.
The settlement covers individuals who bought, sold, or traded NFTs on DraftKings’ platform between August 11, 2021, and the date of the final court ruling. The $10 million settlement fund will be used to compensate affected users, cover legal and administrative expenses, and potentially provide a lead plaintiff award. Importantly, any unclaimed funds will not be returned to DraftKings.
Impact on DraftKings and NFT Market Participants
The settlement could impact an estimated 175,000 individuals who participated in NFT transactions on the platform. While this agreement resolves one legal issue, DraftKings also faced additional legal challenges following the marketplace shutdown.
Among these was a dispute with the NFL Players Association (NFLPA) over the use of player likenesses in NFT products. The NFLPA alleged that DraftKings breached contractual agreements regarding the licensing of NFL players’ images, leading to another legal resolution.
Recommended