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DraftKings has agreed to settle a class action lawsuit which alleged it violated Federal Securities Law when it sold NFTs on its marketplace, according to a Federal court filing on Wednesday.
The settlement, which was negotiated by both parties “at an arm’s length,” would see the company pay $10 million cash to a settlement fund which will pay for legal fees, settlement costs, and compensation to each participating class member, defined as “persons or entities who purchased, acquired, sold, disposed of, owned, held, used, or otherwise transacted in NFTs in a DraftKings account.”
The motion for preliminary approval highlighted the “inherent risks and inevitable delays of continued litigation” and indicated that the settlement was “fair, reasonable, and in the best interest of the Settlement Class.”
The suit was originally filed in 2023 by lead plaintiff Justin Dufoe on behalf of himself and others who purchased or acquired DraftKings NFTs, seeking damages based on the allegations that its NFTs were unregistered securities.
The fantasy sports company previously attempted to get it dismissed but was denied by a U.S. District Court judge in Massachusetts, leading to the immediate shuttering of its NFT fantasy sports offering, DraftKings Reignmakers.
Reignmakers offered users the opportunity to enter fantasy sports contests similar to the company’s daily fantasy sports offerings, using collectible NFTs on the Ethereum scaling blockchain Polygon to fill out lineups full of players from the PGA Tour, UFC, and NFL.
The company amassed more than $280 million in total trading volume for the product according to CryptoSlam, facilitating more than 10 million transactions on its marketplace in the process.
Around the time of the product closure, users were offered the opportunity to relinquish their Reignmakers NFTs for cash, or move them to a self-custody wallet. According to a page dedicated to Reignmakers on the DraftKings website, any player who accepted a cash payment for their game pieces had their NFTs burned if they did not move them to a self-custody wallet by Oct. 31, 2024.
“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,” the DK Team wrote on the page.
A final approval hearing for the settlement is expected to occur later this year.
DraftKings Inc. shares (DKNG) trade on the Nasdaq Exchange and are up 1.1% in the last 24 hours and more than 19% year to date.
By James Rubin
Read the full article here
