DraftKings Agrees to $10 Million Settlement Over NFT Securities Lawsuit

DraftKings, a leading online sports betting platform, has reached a $10 million settlement to resolve a class-action lawsuit alleging that its non-fungible tokens (NFTs) were unregistered securities. This decision follows a ruling by a U.S. District Judge that classified the NFTs as potentially falling under securities regulations, raising significant concerns for investors.

Key Takeaways

• DraftKings will pay $10 million to settle claims regarding its NFT platform.

• The lawsuit claimed that DraftKings sold unregistered securities through its NFT marketplace.

• Affected individuals can file claims until July 21, 2025.

• The case highlights increasing regulatory scrutiny of digital assets.

Background of the Lawsuit

The class-action lawsuit was initiated in March 2023 by lead plaintiff Justin Dufoe, who contended that DraftKings’ Reignmakers NFTs constituted investment contracts under U.S. securities law, specifically referencing the Howey Test. This test is a legal standard used to determine whether certain transactions qualify as securities.

In July 2024, U.S. District Judge Denise Casper denied DraftKings’ motion to dismiss the case, ruling that the NFTs could reasonably be classified as securities. This pivotal decision led to the eventual shutdown of DraftKings’ NFT platform, leaving many users with assets that rapidly lost value.

Details of the Settlement

The $10 million settlement was preliminarily approved on February 28, 2025. The funds will be distributed among individuals who purchased, sold, or held DraftKings NFTs between August 11, 2021, and the final judgment date.

• Eligible Claimants: Individuals who engaged in transactions involving DraftKings NFTs during the specified period.

• Distribution of Funds: After deducting legal fees and administrative costs, the remaining settlement amount will be shared proportionally among eligible class members.

• Service Award: Lead plaintiff Justin Dufoe is expected to receive a $50,000 service award for his role in representing the class.

Implications of the NFT Marketplace Closure

DraftKings cited “recent legal developments” as the reason for shutting down its NFT marketplace, which left many Reignmakers NFTs illiquid and virtually worthless. This closure occurred shortly after DraftKings reached a separate undisclosed settlement with the NFL Players Association for using player likenesses without proper compensation.

Who Is Eligible for Compensation?

If you are a U.S. resident who purchased, sold, or held a DraftKings NFT through the DK Marketplace during the defined class period, you may be eligible to claim part of the settlement. Claimants should stay updated through official notifications regarding claim submission deadlines and methods, which will be provided following final court approval.

The Bigger Picture: Regulatory Scrutiny

This case is part of a broader trend of legal actions targeting crypto and NFT platforms over alleged securities violations. It underscores the increasing regulatory scrutiny of digital assets and the necessity for consumer protection in evolving financial markets.

As digital finance continues to evolve, this case serves as a reminder for investors to conduct thorough due diligence, understand the risks involved, and stay informed about regulatory developments. The DraftKings settlement marks a significant moment in the legal landscape surrounding NFTs and digital assets, potentially setting a precedent for future cases.

Sources

• $10M DraftKings NFT class action settlement, Class Action Lawsuits.

• DraftKings Settles NFT Lawsuit for $10 Million After Judge Rules NFTs May Be Securities, On The Edge News.

• DraftKings to payout $10m over NFT Marketplace lawsuit, Insider Sport.