TLDR
- DraftKings has ended its Reignmakers NFT fantasy sports experience and marketplace
- The decision follows a federal judge allowing a class action lawsuit to proceed
- Users can cash out their NFTs or transfer them to personal wallets
- DraftKings’ NFT platform saw $280 million in total sales since 2021
- The move highlights ongoing legal uncertainty around NFTs in the sports and gaming industry
DraftKings, a major player in the sports betting industry, has announced the immediate closure of its Reignmakers NFT fantasy sports experience and associated marketplace. The company made this decision in response to recent legal developments.
The shutdown comes on the heels of a federal judge’s ruling that allowed a class action lawsuit against DraftKings to move forward. The lawsuit, filed in March 2023, claims that the company’s NFTs could be classified as unregistered securities.
In an email to users, DraftKings explained,
“We have decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments.”
The company emphasized that this was not an easy decision to make.
Launched in 2021 on the Polygon network, an Ethereum scaling solution, DraftKings’ NFT platform initially saw significant success.
The Reignmakers game allowed users to compete in fantasy sports contests across football, golf, and mixed martial arts using NFTs. These digital assets sometimes fluctuated in value based on athletes’ performances and could be traded on a dedicated marketplace.
According to data from CryptoSlam, DraftKings’ NFT venture generated impressive numbers, with $280 million in total sales across various sports, including secondary market trades. The platform’s most successful month coincided with the start of the 2023 NFL season, recording $21 million in sales from 30,000 unique buyers.
With the sudden closure, DraftKings is offering two options to its NFT holders. Users can either receive a cash payout for giving up their NFTs or transfer them to a self-custodial wallet. The company has assured users that their digital assets will remain accessible and transferable during the wind-down process.
The legal challenge that prompted this decision stems from a lawsuit filed by DraftKings customer Justin Dufoe. The suit alleges that the company’s NFTs meet the criteria of the Howey test, a legal framework used to determine whether an asset qualifies as a security.
On July 2, Judge Denise Jefferson Casper of the United States District Court for the District of Massachusetts ruled that the lawsuit could proceed to trial. The judge found that the plaintiffs had “plausibly alleged that DraftKings’ NFTs satisfy three prongs of the Howey test.”
This case is not isolated in the NFT space. Recently, Dapper Labs, the company behind NBA Top Shot, reached a $4 million settlement in a similar lawsuit where customers alleged their NFTs were unregistered securities.
