TLDR
- DraftKings has shut down its NFT business and Reignmakers fantasy sports game due to “legal developments”
- This comes after a federal judge ruled DraftKings NFTs could potentially be considered securities
- Users can receive cash payouts for their NFTs or transfer them to personal wallets
- The shutdown follows a class action lawsuit alleging DraftKings NFTs were unregistered securities
- DraftKings’ NFT marketplace on Polygon saw $280 million in total sales since launching in 2021
DraftKings, the popular sports betting platform, has announced the immediate discontinuation of its NFT business and Reignmakers fantasy sports game. The company cited “recent legal developments” as the reason for this decision.
The move comes just four weeks after a federal court judge denied DraftKings’ motion to dismiss a class action lawsuit. The lawsuit, filed in March 2023, alleges that the company’s NFTs were unregistered securities.
In an email to users, DraftKings stated,
“After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments.”
The company added that this decision “was not made lightly.”
DraftKings launched its NFT marketplace on the Ethereum layer 2 Polygon network during the summer of 2021. The platform saw significant success initially, with one of its first Tom Brady-themed NFT collectibles selling out “immediately.”
According to data from CryptoSlam, DraftKings’ NFTs generated $280 million in total sales across various sports, including secondary market trades.
The project’s best month coincided with the start of the NFL season last September, recording $21 million in total sales from 30,000 unique buyers.
Users of the Reignmakers game and NFT marketplace now have two options. They can either receive a cash payout for relinquishing their NFTs or transfer them to a self-custodial wallet.
DraftKings has assured users that their NFTs and “Reignmakers digital game pieces” will remain accessible and transferable during the discontinuation process.
Draftkings is terminating support for their Reignmakers NFT.
This why I never supported the web3 gaming "own your assets" myth.
When the game dies, so does your NFTs. Same as in web2. It's not a reason to go to web3 and most games that focus on that will fail. pic.twitter.com/ITFkSv5BvU
— DiamondCruiser.eth (@Diamond_Cruiser) July 31, 2024
The legal issues surrounding DraftKings’ NFTs stem from a class action lawsuit filed by customer Justin Dufoe in March 2023. Dufoe claimed that the NFTs met the criteria of the Howey test, potentially classifying them as securities.
On July 2, Judge Denise Jefferson Casper of the United States District Court for the District of Massachusetts found that Dufoe had “plausibly pled” that DraftKings NFTs were investment contracts and thus securities “within the meaning” of the Securities Act and Exchange Act.
This development follows a similar case involving Dapper Labs, the company behind NBA Top Shot NFTs. In June, Dapper Labs agreed to pay $4 million to settle a dispute over allegations that its NFTs were unregistered securities.
The DraftKings case is part of a broader conversation about the legal status of NFTs. Just a day before DraftKings’ announcement, two artists sued the US securities regulator seeking clarity on whether NFTs fall under the commission’s authority.
DraftKings’ NFT shutdown comes at a time when the NFT market is experiencing a downturn.
According to CryptoSlam’s NFT data tracker, July is set to see the lowest monthly sales volume since November 2023, with a combined $407.8 million in sales so far this month.
This marks a 74.6% decrease from March, which saw a 2024-record of $1.6 billion in sales.
