Sports gambling company DraftKings has wound up its NFT business owing to “legal developments.”
A few weeks back, a judge denied DraftKings’ motion to dismiss revolving around a class action lawsuit that claimed that the NFTs issued by the comapny were unregistered securities.
The sports betting platform — that launched its NFT marketplace on the Polygon network during 2021’s NFT summer — told its users,
“After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments. This decision was not made lightly, and we believe it is the right course of action.”
DraftKings is offering buyouts to its fantasy sports game Reignmakers’ players. NFT collectors will be allowed to access and transfer their tokens.
On the heels of the launch, the firm noted “immense” demand for one of its initial Tom Brady-themed NFT collectibles. That collection sold out “immediately.”
Nevertheless, in March last year, Justin Dufoe, one of DraftKing’s customers, filed a class action lawsuit against the firm. He alleged that the digital trading cards sold by DraftKings are securities according to the Howey test.
As per court records, the class action suits against DraftKings seems to be headed to trial.
In a similar case three years back, investors allegedly claimed that Dapper Labs’ NBA Top Shot Moment NFTs were unregistered securities. They accused Dapper Labs of withholding investors from liquidating their assets for “months on end.”
This, they said, was done to keep value locked on the platform. Doing so did not allow the NFTs to be bought or sold on external NFT platforms when the suit was filed.
In June this year, Dapper Labs agreed to pay $4 million to settle the suit, prohibiting the plaintiffs from associating the securities tag with its NFTs.
In a more recent development, two artists sued the US Securities and Exchange Commission in a bid to get clarity around the classification of NFTs and whether they fall under the agency’s regulatory ambit.
