Sports gambling company DraftKings has announced the immediate shutdown of its non-fungible token (NFT) business, including the Reignmakers platform and its NFT Marketplace. The decision follows recent legal developments, including a class action lawsuit alleging that DraftKings’ NFTs were unregistered securities. This legal action gained traction when a federal judge allowed the case to proceed, citing that the plaintiffs had “plausibly pled” their claims.
DraftKings ventured into the NFT space in mid-2021, inspired by the success of digital collectibles like NBA Top Shot. Co-founder Matt Kalish described the move as a strategic entry into a potentially massive market over the next few decades. The company built an in-house marketplace on the Polygon network, starting with a popular Tom Brady-themed collection. Despite the cooling interest in general NFT collectibles by 2022, DraftKings continued to explore the space through Reignmakers, a fantasy sports game powered by NFTs. The platform initially showed promise, with plans to expand beyond football to UFC and PGA.
However, the NFT market’s potential legal pitfalls soon became evident. DraftKings faced class action lawsuits asserting that its NFT sales violated securities laws, a challenge that other sports-themed NFT companies have also encountered. Notably, NBA Top Shot settled a similar case with a $4 million payout earlier this year. With the class action against DraftKings heading to trial, the company has opted to cease its NFT operations and is offering buyouts to Reignmakers players. Collectors will still have the ability to access and transfer their NFTs.
Joel Belfer, who runs the Mint Condition blog on sports collectibles, emphasized the importance of legal compliance in the NFT and collectibles space to avoid outcomes like DraftKings’. The situation serves as a cautionary tale for companies navigating the complex regulatory landscape surrounding digital assets.
