NFTs
DraftKings Shuts Down NFT Marketplace Amid Legal Headaches
Online Betting Service Draft Kings said it is shutting down its three-year-old non-fungible token (NFT) marketplace.
The company announced On Tuesday (July 30) the marketplace was shut down, along with Reignmakers, an NFT-based fantasy sports game, due to “recent legal developments.”
“This decision was not made lightly, and we believe it is the right course of action,” DraftKings said in its announcement. “In light of this update, we have decided to offer all Reignmakers digital game piece holders the opportunity to relinquish those game pieces to DraftKings in exchange for a cash payment (subject to certain conditions).”
DraftKings says Reignmakers and the NFT marketplace will be discontinued immediately, but customers can still access their Reignmakers digital game pieces and other NFTs through the My Portfolio page.
While the company did not specify the nature of the legal developments, a Coindesk report released Tuesday noted that DraftKings is the subject of a federal class action lawsuit claiming that the company’s NFTs are unregistered securities.
NFTs first emerged during the 2021 crypto bull market, with advocates promoting them as a way for everyday consumers to play a role in the digital currency market. They have since plummeted in popularity, with NFT sales falling 63% in 2023.
Earlier this year, GameStopwhich had introduced an NFT marketplace in the summer of 2022, has decided to exit the non-fungible token business, citing the continued regulatory uncertainty around the larger cryptocurrency market.
Meanwhile, the US Treasury Department released an assessment in May that concluded that NFTs are “highly susceptible“for theft and use in fraud and scams.
“In addition, criminals use NFTs to launder proceeds from predicate crimes, often in combination with other techniques or transactions designed to obfuscate the illicit source of funds,” the assessment said. “Criminals may exploit vulnerabilities related to the characteristics of NFTs, the assets or rights they reference, and regulatory frameworks in the United States and abroad.”
The treasury found that cybersecurity vulnerabilities, challenges related to copyright and trademark protections, and false advertising and fluctuating prices of NFTs could allow criminals to commit fraud and theft related to NFTs and their platforms.
To make matters worse, the Treasury said, NFT companies and platforms lack of internal controls to prevent threats to market integrity, sanctions evasion, terrorist financing and money laundering.
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