DraftKings Shuts Down NFT Operations Amid Legal Challenges

Sports gambling giant DraftKings halts its NFT business following legal disputes over securities classification.

DraftKings has announced an immediate cessation of its non-fungible token (NFT) business, citing recent legal developments. The decision comes after a federal judge allowed a class action lawsuit to proceed, alleging that DraftKings' NFTs were unregistered securities.

DraftKings ventured into the NFT space in mid-2021, inspired by the success of digital collectibles like NBA Top Shot. The company launched its NFT marketplace with a Tom Brady-themed collection and later introduced Reignmakers, a fantasy sports game powered by NFTs.

Despite initial success, the company faced mounting legal challenges. This year, DraftKings and other sports-themed NFT companies were hit with class action lawsuits for allegedly violating securities laws. In June, NBA Top Shot settled a similar lawsuit with a $4 million payout.

In an email to customers, DraftKings stated, "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."

As part of the shutdown, DraftKings is offering buyouts to Reignmakers players, while collectors can still access and transfer their NFTs. The decision underscores the importance of legal compliance in the rapidly evolving NFT and digital collectibles space.

Joel Belfer, who runs the Mint Condition blog on sports collectibles, commented, "It's important for all companies wading into the NFT and collectibles space to be buttoned up legally or else you risk an outcome like DraftKings. It's not the first or last time we’ll see a company face legal challenges and halt an offering due to running up against securities laws."

photo source / Blockonome