Legal Drama Forces DraftKings to Pull the Plug on NFT Business
DraftKings (NASDAQ: DKNG) has abruptly shut down its non-fungible token business, effective immediately “due to recent legal developments”. This decision marks the end of DraftKings’ foray into the digital collectibles market, which had 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 right course of action,” the company stated in an email to its customers.
The legal challenges confronting DraftKings’ NFT ventures have played a significant role in this decision. Just weeks ago, a federal judge permitted a class-action lawsuit against DraftKings to proceed, finding that the plaintiffs had “plausibly pled” that DraftKings’ NFTs constituted unregistered securities.
DraftKings initially entered the NFT market in mid-2021, spurred by the success of digital collectible 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 we wanted to be a part of this space that could become gigantic in the next couple of decades.”
The company’s NFT business was built around an in-house marketplace and started with a Tom Brady-themed collection, which quickly sold out. Despite a decline in the broader market’s enthusiasm for NFTs by 2022, DraftKings remained committed to its web3 endeavors through Reignmakers, a fantasy sports game powered by NFTs. “We were really looking to build the best utility-driven NFT product out there, and we saw some really great momentum in the first few months,” Kalish said on the Ark podcast.
DraftKings expanded Reignmakers from football to include UFC and PGA, driven by strong internal sales figures. However, this year saw the company facing 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 against DraftKings is expected to go to trial. As part of the shutdown of its NFT business, DraftKings is offering buyouts to Reignmakers players. Collectors will still be able to access and transfer their collections despite the discontinuation of the platform.
Draftkings last traded at $36.94 on the NASDAQ.
Information for this story was found via Coindesk and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
