DraftKings Kills Fantasy Sports NFT Business Amid Class Action Lawsuit

Citing “recent legal developments,” the company wrote in an email reviewed by Decrypt that Reignmakers and its associated NFT marketplace have been discontinued. Meanwhile, users have the opportunity to “relinquish those game pieces” in exchange for a cash payment or withdraw them to a self-custodial wallet.

Stemming from a 2021 agreement with Polygon, an Ethereum scaling network, DraftKings’ Reignmakers let users compete in fantasy sports contests across football, golf, and mixed martial arts. The value of the NFTs sometimes fluctuated based on athletes’ performances, and could be resold on a dedicated marketplace.

“We extend our heartfelt thanks to all of you who made Reignmakers special,” DraftKings told users in the email Tuesday, adding that the “decision was not made lightly.” DraftKings had still been tweeting about Reignmakers competitions as recently as Monday.

The abrupt end to Reignmakers and DraftKings’ NFT marketplace was motivated by a recent decision in Massachusetts federal court, a person familiar with the move told Decrypt. In a class action lawsuit filed last March, DraftKings users alleged that Reignmakers NFTs were offered as unregistered securities under the Howey Test, a legal framework for assets.

DraftKings moved to dismiss the lawsuit, but Judge Denise Jefferson Casper of the United States District Court for the District of Massachusetts ruled the lawsuit could proceed to trial.

Casper found earlier this month that the lawsuit’s plaintiffs “plausibly alleged that DraftKings’ NFTs satisfy three prongs of the Howey test,” including the investment of money in a common enterprise where an expectation of profit is derived from the efforts of others.

“I will never spend another dollar at this dumpster fire,” Reddit user No_Gap4123 lamented in DraftKings’ community. Another user named sirjackel06 wrote, “I will be suing if they don't make this right.”

DraftKings said in a written statement to Decrypt that NFTs and “Reignmakers digital game pieces” will remain accessible and transferable as the discontinuation gets underway. It added the firm will continue to keep its community updated as it follows “the right course of action.”

In June, Dapper Labs, the company behind NBA Top Shot and other prominent on-chain collectibles, reached a $4 million settlement with disgruntled holders of its NFTs. In that lawsuit, customers alleged that NFTs offered by Dapper Labs constituted unregistered securities as well.

“It has always been in DraftKings’ DNA to innovate and disrupt in order to provide the best possible gameplay experiences for our customers,” DraftKings continued, adding that Reignmakers and the NFT marketplace “saw immediate success upon launch.”

A separate Reddit user named Aberdeen1964 wrote that DraftKings should “finish the season,” expressing concern that a cash payout would be less than the amount that they had spent.

Across several sports, DraftKings NFTs notched $280 million in total sales—including secondary market trades—according to CryptoSlam data. As the NFL season kicked off last September, the project notched its best month, with $21 million in total sales across 30,000 unique buyers.

While DraftKings’ NFTs could sometimes fetch thousands of dollars on its secondary marketplace—a top sale of $70,000 took place three years ago—a majority went for small amounts of change. That includes what could be the project’s last transaction, when a Reignmakers NFT sold Tuesday for $0.33.

Edited by Andrew Hayward