NFTs
DraftKings kills fantasy sports NFT business amid class action lawsuit
Fantasy sports giant DraftKings informed users on Tuesday that its Polygon-fed NFT Reignmakers experiment has come to an unceremonious end, effective immediately.
Citing “recent legal developments,” the company wrote in an email reviewed by Decipher that Reignmakers and its associated NFT marketplace have been discontinued. In the meantime, users have the opportunity to “give up these game pieces” in exchange for a cash payment or withdraw them to a self-custodial wallet.
Arising from 2021 agreement with Polygon, a Ethereum A scalable network, DraftKings’ Reignmakers allowed users to compete in fantasy sports competitions in football, golf, and mixed martial arts. The value of the NFTs sometimes fluctuated based on the athletes’ performances and could be resold on a dedicated marketplace.
“We extend our sincere thanks to all of you who made Reignmakers special,” DraftKings told users in Tuesday’s email, adding that the “decision was not made lightly.” DraftKings was still tweeting about the Reignmakers contests on Monday.
The abrupt end of Reignmakers and DraftKings’ NFT marketplace was prompted by a recent ruling in Massachusetts federal court, a person familiar with the move said. Decipher. In a class action lawsuit filed last March, DraftKings users alleged that Reignmakers’ NFTs were offered as unregistered securities under the Howey Test, a legal framework for assets.
DraftKings moved to dismiss the lawsuit, but Judge Denise Jefferson Casper of the United States District Court for the District of Massachusetts ruled that the lawsuit could proceed to trial.
Casper found earlier this month that the plaintiffs in the lawsuit “plausibly alleged that DraftKings’ NFTs satisfy three aspects of the Howey test,” including investing money in a common enterprise where the expectation of profit is derived from the efforts of others.
“I will never spend another dollar on this garbage fire again,” Reddit user No_Gap4123 regretted in the DraftKings community. Another user named sirjackel06 he wrote“I’m going to sue if they don’t fix this.”
DraftKings said in a written statement Decipher that NFTs and “Reignmakers digital game pieces” will remain accessible and transferable as the shutdown is underway. He added that the company will continue to keep its community updated while following “the right course of action.”
In June, Dapper Labs, the company behind NBA Best Shot and other prominent collectibles on the chain, have reached a $4 million settlement with disgruntled holders of their NFTs. In that lawsuit, customers alleged that the NFTs offered by Dapper Labs also constituted unregistered securities.
“It has always been in DraftKings’ DNA to innovate and disrupt to provide the best possible gaming experiences for our customers,” DraftKings continued, adding that Reignmakers and the NFT marketplace “saw immediate success upon launch.”
A separate Reddit user named Aberdeen1964 he wrote that DraftKings should “finish the season,” expressing concern that the cash payout would be less than the amount they spent.
Across multiple sports, DraftKings NFTs have grossed $280 million in total sales — including secondary market trades — according to CryptoSlam data. When the NFL season began last September, the project recorded its best month ever, with $21 million in total sales among 30,000 unique buyers.
While DraftKings’ NFTs could sometimes fetch thousands of dollars on its secondary market — a peak sale of $70,000 occurred three years ago — most have gone for small amounts of change. That includes what may be the project’s latest transaction, when a Reignmakers NFT sold Tuesday for $0.33.
Edited by Andre Hayward