DraftKings Agrees to $10 Million Settlement in NFT Class-Action Lawsuit

DraftKings, the prominent sports betting and gaming company, has reached a $10 million settlement in a class-action lawsuit concerning its non-fungible token (NFT) marketplace. The lawsuit, initiated by buyers of DraftKings NFTs, alleged that the tokens were unregistered securities, leading to significant financial losses for investors.

Key Takeaways

• DraftKings will pay $10 million to settle claims related to its NFT marketplace.

• The lawsuit claimed that DraftKings NFTs were unregistered securities under U.S. law.

• The settlement follows a series of legal challenges regarding the classification of NFTs.

• The agreement aims to avoid prolonged litigation and associated costs.

Background of the Lawsuit

The class-action lawsuit was filed in March 2023 by lead plaintiff Justin Dufoe, who claimed to have lost approximately $14,000 from his investments in DraftKings NFTs. The suit argued that the NFTs sold through DraftKings' marketplace constituted investment contracts, thus requiring registration under federal securities laws.

In July 2024, a federal judge ruled that the NFTs could indeed be classified as securities, which significantly impacted DraftKings' legal strategy. Following this ruling, the company decided to shut down its NFT marketplace, citing legal uncertainties as a primary reason.

Settlement Details

On February 28, 2025, Judge Denise Casper of the Boston federal court approved a preliminary settlement motion. The key points of the settlement include:

• Total Settlement Amount: $10 million, to be distributed among class members.

• Lead Plaintiff Compensation: Dufoe is expected to request a $50,000 award for his efforts in the litigation.

• Attorney Fees: Up to one-third of the settlement fund will be allocated for legal fees and litigation expenses.

The settlement was reached after extensive negotiations, which included mediation with a neutral third party. The class group expressed satisfaction with the outcome, emphasizing that it would prevent costly and prolonged litigation.

Implications for DraftKings

This settlement marks a significant moment for DraftKings as it navigates the complex landscape of digital assets and securities law. The company has faced increasing scrutiny over its NFT offerings, particularly as the market for such digital collectibles has cooled.

In addition to this lawsuit, DraftKings previously settled a separate case with the National Football League Players Association (NFLPA) regarding the use of player likenesses in NFTs. This indicates a broader trend of legal challenges facing companies involved in the NFT space, as regulatory frameworks continue to evolve.

Conclusion

The $10 million settlement reflects the ongoing challenges and legal complexities surrounding NFTs and their classification as securities. As DraftKings moves forward, the outcome of this case may influence how other companies approach NFT offerings and compliance with securities regulations. The resolution of this lawsuit is a critical step for DraftKings in restoring investor confidence and focusing on its core business operations.

Sources

• DraftKings settles NFL players union lawsuit over NFT contract, Reuters.

• Court Declines To Dismiss Securities Class Action Alleging That DraftKings NFTs Are ‘Securities’, Skadden, Arps, Slate, Meagher & Flom LLP.

• DraftKings settles class-action lawsuit over NFT marketplace for $10M, Cointelegraph.