TLDR
- DraftKings halts Reignmakers, its NFT-centric fantasy sports hub, and connected marketplace, citing 'recent legal developments.'
- The cessation comes on the heels of a federal judge permitting the continuation of a class action, claiming DraftKings' NFTs were unregistered securities.
- Participants have the choice to either receive a cash settlement for surrendering their NFTs or to transfer them to a self-managed wallet.
- DraftKings' NFT arm has witnessed a $280 million conglomeration in sales since its 2021 inception.
- This move follows a pattern of legal hurdles facing NFT platforms, akin to NBA Top Shot's recent $4 million settlement over a similar claim.
Gambling titan DraftKings has decisively shuttered its NFT-powered fantasy sports pursuit , Reignmakers, alongside its marketplace citing legal turbulence in an email statement dispatched to users on July 30, 2024.
The halt arrives just weeks following a major legal defeat for DraftKings. In early July, Judge Denise Jefferson Casper, operating under the United States District Court for the District of Massachusetts, dictated that a legal action against the firm could progress to trial.
The March 2023 filed lawsuit posits that DraftKings' NFTs were proffered as unregistered securities by the framework of the Howey Test, used to evaluate asset qualification as securities.
Judge Casper concurred that the accusers 'plausibly alleged DraftKings' NFTs met the three elements of the Howey Test,' implicating an investment in a mutual venture expecting returns based on others' exertions.
This decree denied DraftKings' endeavor to dismiss the case, potentially setting the stage for a landmark trial that could significantly impact the NFT domain.
DraftKings inaugurated its NFT marketplace utilizing the Ethereum network's scaling solution, Polygon. in 2021, during the height of the NFT craze.
Reignmakers enabled enthusiasts to engage in fantasy sports showdowns spanning football, golf, and mixed martial arts through NFTs. These digital collectibles' values fluctuated with athletes' performance metrics and could be traded on a specialized marketplace.
According to data from CryptoSlam , DraftKings' NFTs amassed $280 million in complete sales, inclusive of secondary market exchanges, since its launch. The project experienced its peak turnover in September 2023, realizing $21 million in sales with 30,000 distinct buyers as the NFL commenced.
In reaction to the closure, DraftKings presents users with a pair of alternatives for their NFTs. They can opt for a cash payout by surrendering their NFTs or transfer them to a self-regulated wallet. The enterprise declared that NFTs and 'Reignmakers digital artifacts' remain serviceable and transferrable amid the termination.
Responses to the decision span the spectrum among users. Some voiced exasperation and dissatisfaction, evident in a Reddit post stating, 'I will avoid spending another dime on this debacle.' Others expressed apprehensions over potential monetary deficits, speculating if the recompense would undercut their initial NFT investment.
DraftKings' legal complications echo a broader wave of adversities confronting NFT ventures. In June 2024, Dapper Labs, creators of NBA Top Shot, concluded a $4 million agreement with displeased NFT holders in an analogous legal contention over unregistered securities disbursement.
The suspension of DraftKings' NFT operations emerges amidst a recession affecting the global NFT market.
Data from CryptoSlam illustrates that July 2024 will likely experience the smallest monthly sales volume for NFTs since November 2023, recording a $407.8 million output, marking a 74.6% reduction from March 2024's apex of $1.6 billion.
In a statement, DraftKings highlighted its allegiance to innovation and disruption to deliver immersive gaming experiences to patrons.
The company remarked that Reignmakers and the NFT marketplace 'achieved instantaneous success post-launch' yet maintained that ceasing the service was the 'correct decision' given the prevailing legal climate.
