DraftKings Settles Class Action Lawsuit

DraftKings has agreed to settle a class action lawsuit that alleged violations of Federal Securities Law regarding its NFT sales, as reported in a Federal court filing on Wednesday.

The negotiated settlement will involve a $10 million cash payment into a settlement fund. This fund will cover legal fees, settlement costs, and provide compensation to individuals in the class, defined as those who engaged with NFTs in a DraftKings account.

The motion for preliminary approval noted the “inherent risks and inevitable delays of continued litigation,” emphasizing that the settlement is “fair, reasonable, and in the best interest of the Settlement Class.”

Initially filed in 2023 by lead plaintiff Justin Dufoe, the lawsuit claims that DraftKings’ NFTs were unregistered securities. Although the company attempted to have the case dismissed, a U.S. District Court judge in Massachusetts denied this request, resulting in the shutdown of its NFT platform, DraftKings Reignmakers.

Reignmakers allowed users to enter fantasy contests using collectible NFTs via the Ethereum scaling blockchain Polygon, focusing on leagues like the PGA Tour, UFC, and NFL. The product garnered over $280 million in trading volume and facilitated more than 10 million transactions, according to CryptoSlam.

At the time of the platform’s closure, users could exchange their Reignmakers NFTs for cash or transfer them to a self-custody wallet. Any NFTs not moved by October 31, 2024, would be burned upon accepting cash payments.

The DraftKings team stated, “In line with our innovative spirit, we ventured into the NFT-based sports world with Reignmakers and accomplished so much in such a short period of time.”

A final approval hearing for the settlement is anticipated later this year.

DraftKings Inc. shares (DKNG) are listed on the Nasdaq Exchange and have increased by 1.1% over the last 24 hours, with more than a 19% rise year to date.

By James Rubin