DraftKings hasĀ agreed to settle a class action lawsuit which alleged it violated Federal Securities Law when it sold NFTs on its marketplace, according to a Federal court filing on Wednesday.Ā The settlement, which was negotiated by both parties āat an armās length,ā would see the company pay $10 million cash to a settlement fund which will pay for legal fees, settlement costs, and compensation to each participating class member, defined as āpersons or entities who purchased, acquired, sold, disposed of, owned, held, used, or otherwise transacted in NFTs in a DraftKings account.āĀ
The motion for preliminary approval highlighted the āinherent risks and inevitable delays of continued litigationā and indicated that the settlement was āfair, reasonable, and in the best interest of the Settlement Class.ā TheĀ suitĀ was originally filed in 2023 by lead plaintiff Justin Dufoe on behalf of himself and others who purchased or acquired DraftKings NFTs, seeking damages based on the allegations that its NFTs were unregistered securities.Ā
The fantasy sports company previously attempted to get it dismissed butĀ was deniedĀ by a U.S. District Court judge in Massachusetts,Ā leading to the immediate shutteringĀ of its NFT fantasy sports offering, DraftKings Reignmakers.Ā Reignmakers offered users the opportunity to enter fantasy sports contests similar to the companyās daily fantasy sports offerings, using collectible NFTs on theĀ EthereumĀ scaling blockchainĀ PolygonĀ to fill out lineups full of players from the PGA Tour, UFC, and NFL.Ā
The company amassed more than $280 million in total trading volume for the product according toĀ CryptoSlam, facilitating more than 10 million transactions on its marketplace in the process.Ā Around the time of the product closure, users were offered the opportunity to relinquish their Reignmakers NFTs for cash, or move them to a self-custody wallet. According to a pageĀ dedicated to ReignmakersĀ on the DraftKings website, any player who accepted a cash payment for their game pieces had their NFTs burned if they did not move them to a self-custody wallet by Oct. 31, 2024.Ā
āIn line with our innovative spirit, we ventured into the NFT-based sports world with Reignmakers and accomplished so much in such a short period of time,ā the DK Team wrote on the page.Ā A final approval hearing for the settlement is expected to occur later this year.Ā DraftKings Inc. shares (DKNG) trade on the Nasdaq Exchange and are up 1.1% in the last 24 hours and more than 19% year to date.Ā
