This decision came amid a lawsuit by a person who lost some $14,000 after allegedly being misguided by the DraftKings Marketplace
American betting giant DraftKings had decided to shut down its non-fungible token (NFT) marketplace and cease the operation of its NFT-based fantasy sports game, Reignmakers. The decision comes amid legal challenges against NFTs’ status as investable securities.
The ongoing challenges the NFT sector faces could have made DraftKings liable in class action litigation. In early July, DraftKings was denied a dismissal of the lawsuit by a US Judge in Massachusetts, threatening its business. The judge ruled that the plaintiffs met the standard for the Howey Test, allowing the legal challenge to proceed.
The lawsuit itself, for context, was initiated by Illinois resident Justin Dufoe, an NFT investor who lost significant amounts of money after his tokens rapidly declined in value. Originally filed in March, the suit alleges that DraftKings sold its NFTs as unregistered securities, misguiding buyers about their investments’ long-term value.
Dufoe lost some $14,000 after allegedly being misguided by the DraftKings Marketplace. The marketplace, for reference, was launched in 2021 when NFTs were all the rage. Prices were soaring, prompting the operator giant’s foray into the sector. DraftKings had even secured an agreement with the NFT collecting platform Autograph to further boost the appeal of its NFT offering.
However, all things eventually come to an end.
Amid the lawsuit, DraftKings has seemingly decided to cut its losses and cease its NFT and NFT-based fantasy sports operations. In a statement, the company decided to compensate its Reignmakers customers by offering all holders of Reignmakers digital game pieces the opportunity to relinquish those game pieces to DraftKings for cash.
The payment amount, DraftKings added, will depend on a variety of factors, including the size and quality of holders’ collections.
Reignmakers was a fantasy sports game where customers could collect valuable NFTs to win fantasy games and grab real money. Unfortunately for DraftKings and its players, NFT prices plummeted several months after the platform’s launch.
Shutting down the NFT operations was not made lightly, according to the company but is ultimately believed to be the best course of action. In any case, this move would at least shield DraftKings from further legal scrutiny, potentially saving it a lot of time and money.
