DraftKings Agrees to $10 Million Settlement in NFT Marketplace 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 NFT buyers, alleged that the NFTs sold by DraftKings were unregistered securities under U.S. law. This settlement marks a significant resolution to ongoing legal challenges faced by the company in the rapidly evolving NFT space.

Key Takeaways

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

• The lawsuit claimed that DraftKings NFTs were unregistered securities.

• The settlement will be distributed among class action members, with additional fees for the lead plaintiff.

• This is the second NFT-related lawsuit DraftKings has settled this year.

Background of the Lawsuit

In March 2023, a class-action lawsuit was filed against DraftKings by Justin Dufoe and other NFT buyers. The plaintiffs argued that the NFTs sold through DraftKings' marketplace constituted investment contracts, thus qualifying as securities under the Howey test. The lawsuit claimed that the NFTs lost significant value after the marketplace was shut down, leading to financial losses for investors.

The suit named several key figures from DraftKings, including co-founders Jason Robins and Matt Kalish, and finance chief Jason Park. Dufoe reported a personal loss of $14,000 from his investments in DraftKings NFTs, which he sold at a loss.

Legal Proceedings

DraftKings attempted to dismiss the lawsuit in September 2023, asserting that the NFTs did not meet the criteria for being classified as securities. However, U.S. District Judge Denise Casper ruled in July 2024 that the NFTs could indeed be considered securities, allowing the case to proceed.

Following this ruling, DraftKings decided to close its NFT marketplace, citing recent legal developments as the reason for the shutdown. This closure rendered the NFTs effectively worthless, prompting the class action to seek a settlement to avoid prolonged litigation.

Settlement Details

On February 28, 2025, Judge Casper granted a preliminary settlement motion, allowing the $10 million to be distributed among the class members. The settlement agreement includes:

• $10 million in cash to be divided among the plaintiffs.

• Lead plaintiff Justin Dufoe may request a $50,000 award for his efforts in the case.

• Attorneys' fees of up to one-third of the settlement fund plus litigation expenses.

The class action group expressed satisfaction with the settlement, describing it as an “outstanding result” that would prevent further costly litigation. They noted that the realistic damages could have ranged from $18 million to $58 million, making the settlement a significant recovery under the circumstances.

Implications for DraftKings

This settlement is the second NFT-related legal issue DraftKings has resolved in 2025. Earlier in January, the company settled a lawsuit with the National Football League Players Association (NFLPA) over the use of NFL player likenesses in its NFTs. The NFLPA alleged that DraftKings failed to compensate them adequately for the use of these likenesses.

As the NFT market continues to evolve, DraftKings' legal challenges highlight the complexities and regulatory scrutiny surrounding digital assets. The outcomes of these lawsuits may set important precedents for how NFTs are classified and regulated in the future, impacting not only DraftKings but the broader NFT marketplace as well.

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.