TLDR
- DraftKings has closed its NFT-powered fantasy sports platform Reignmakers and the associated marketplace due to recent legal issues.
- A class action lawsuit alleging that DraftKings’ NFTs were unregistered securities led to the decision to shut down the platform.
- Users can choose between receiving a cash payout for their NFTs or transferring them to a self-custodial wallet.
- Since its launch in 2021, DraftKings’ NFT business had generated $280 million in total sales.
- This decision follows a pattern of legal challenges for NFT platforms, with NBA Top Shot settling a similar lawsuit for $4 million recently.
Fantasy sports and betting company DraftKings unexpectedly terminated its NFT-powered fantasy sports platform called Reignmakers and its marketplace. The company informed users about the immediate discontinuation on July 30, 2024, citing “recent legal developments” as the reason.
The closure came shortly after a federal judge allowed a class action lawsuit against DraftKings to proceed. This lawsuit, filed in 2023, claimed that DraftKings’ NFTs were unregistered securities under the Howey Test, a legal standard used to classify assets as securities.
The judge found that the plaintiffs had made a plausible case that DraftKings’ NFTs met the criteria of the Howey test, allowing the lawsuit to move forward toward trial.
DraftKings introduced its NFT marketplace during the peak of the NFT craze in 2021, enabling users to participate in fantasy sports contests using NFTs related to football, golf, and mixed martial arts.
These digital assets could fluctuate in value based on athletes’ performances and were tradable on a dedicated marketplace. DraftKings’ NFTs generated $280 million in total sales since the platform’s launch, with the best month being September 2023, coinciding with the start of the NFL season.
As a response to the shutdown, DraftKings offered users two choices regarding their NFTs – they could either receive a cash payout by surrendering their NFTs or move them to a self-custodial wallet. The company assured users that NFTs and digital game pieces from Reignmakers would remain accessible and transferrable throughout the discontinuation process.
Feedback from users varied, with some expressing frustration and disappointment while others voiced concerns over potential financial losses. Some users questioned if the cash payout would be less than the amount they had invested in the NFTs.
The closure of DraftKings’ NFT platform aligns with a broader trend of legal hurdles faced by NFT platforms. In a similar lawsuit, Dapper Labs, the entity behind NBA Top Shot, settled with NFT holders for $4 million over claims of unregistered securities offerings.
With the overall NFT market experiencing a downturn, July 2024 is projected to have the lowest monthly sales volume since November 2023, indicating a significant drop in sales compared to earlier in the year.
DraftKings emphasized its dedication to delivering innovative and disruptive gameplay experiences for customers, noting the initial success of Reignmakers and the NFT marketplace. However, given the prevailing legal environment, the company deemed discontinuing the service as the appropriate course of action.
Hot Take
As the NFT landscape faces legal challenges, DraftKings’ decision to shut down Reignmakers underscores the regulatory uncertainty surrounding NFT platforms and the potential impact on users and the broader market.
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