NFTs
Judge advances DraftKings case, digital cards as securities
A US judge in a Massachusetts court has refused to dismiss a class action lawsuit against DraftKings over whether its online trading cards are securities, allowing the case to move forward.
DraftKings NFT buyers filed the lawsuit claiming that such contracts are investment contracts and should be regulated as securities.
Application of the Howey test
O court found that digital cards purchased through the Marketplace were securities under the Howey test. In general, there is a trend toward rigorous investigation into this issue and attempts at tightening it.
Plaintiffs argue that the investment in DraftKings’ digital cards was made with the expectation of profits, predominantly from DraftKings’ efforts to promote a joint venture, thus meeting the Howey test requirement.
Legal review
Furthermore, this case sets a precedent for how future US law will view other digital assets. The reason behind this is that NFTs blur the lines between digital collectibles and investment assets; this case could very well reshape the regulatory landscape across the industry.
The case highlights more legal challenges for companies operating in the digital asset space. DraftKings’ position that its NFTs should be incorporated into gameplay rather than merely serving as an investment tool plays well with the complexities of modern digital assets.
As this case progresses, the commercial repercussions are diverse, coming at a time of strict regulatory and court oversight in defining the legal status of NFTs and other digital assets.
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