NFTs
Legal drama forces DraftKings to end NFT business
DraftKings (NASDAQ: DKNG) has abruptly shut down its non-fungible token business, effective immediately “due to recent legal developments.” The decision marks the end of DraftKings’ foray into the digital collectibles market, which aimed to merge sports culture with the burgeoning world of NFTs.
“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 correct course of action,” the company said in an email to its customers.
The legal challenges facing DraftKings’ NFT ventures played a significant role in that decision. Just a few weeks ago, a federal judge allowed a class action lawsuit against DraftKings to proceed, finding that the plaintiffs had “plausibly alleged” that DraftKings’ NFTs constituted unregistered securities.
DraftKings initially entered the NFT market in mid-2021, spurred by the success of digital collectibles projects like NBA Top Shot. In a podcast with Ark Invest last year, co-founder Matt Kalish explained, “We saw our ‘golden’ customers embracing digital collectibles and wanted to be a part of this space that could become huge in the coming decades.”
The company’s NFT business was built around an internal marketplace and began with a Tom Brady-themed collection that quickly sold out. Despite a decline in broader market enthusiasm for NFTs in 2022, DraftKings has remained committed to its Web3 efforts through Reignmakers, an NFT-powered fantasy sports game. “We were really looking to build the best utility-oriented NFT product on the market, and we saw a lot of momentum in the first few months,” Kalish said on the Ark podcast.
DraftKings expanded its Reignmakers from soccer to include the UFC and PGA, buoyed by strong internal sales numbers. However, this year, the company faced multiple class-action lawsuits alleging that its NFT sales violated securities laws, a challenge faced by other sports-themed NFT companies as well. In June, NBA Top Shot settled a similar lawsuit with a $4 million payout.
According to court records, the class action lawsuit against DraftKings is set to go to trial. As part of winding down its NFT business, DraftKings is offering buyouts to Reignmakers players. Collectors will still be able to access and transfer their collections despite the platform’s discontinuation.
Draftkings last traded at $36.94 on NASDAQ.
Information for this story was obtained via Coindesk and the sources mentioned. The author has no titles or affiliations related to this organization. This is not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author is not licensed.