DraftKings and NFLPA Settle NFT Contract Lawsuit

DraftKings, the prominent sports-betting company, has reached a settlement with the National Football League Players Association (NFLPA) regarding a lawsuit over an NFT contract. The dispute centered on DraftKings' alleged failure to compensate the NFLPA for the use of NFL player likenesses in their non-fungible token (NFT) offerings.

DraftKings and NFLPA Settle NFT Contract Dispute

Sports-betting giant DraftKings and the National Football League Players Association (NFLPA) have announced a settlement in their legal battle concerning an NFT contract. The lawsuit, filed by the NFLPA, accused DraftKings of failing to make payments for the use of NFL player likenesses in their digital collectible offerings. Both parties informed a New York federal court on Monday, January 27, 2025, that they had reached an agreement in principle and requested a pause to finalize the terms.

Background of the Dispute

The partnership between Boston-based DraftKings and the NFLPA began in 2021, aiming to create collectible NFTs of NFL players for a fantasy sports game. However, the relationship soured in 2023 when the NFLPA alleged that DraftKings threatened to discontinue the NFT offerings. This led to a restructured contract between the two entities.

According to the NFLPA's complaint, the amended contract included a provision allowing DraftKings to terminate the agreement if a court determined that the NFTs were securities. This clause became significant after a federal judge in Boston, in a separate class-action lawsuit against DraftKings last year, suggested that the tokens might be unregistered securities.

Weeks after this judicial opinion, DraftKings informed the NFLPA of its decision to end its NFT business and terminate their agreement. The NFLPA countered in its lawsuit that the Massachusetts judge's decision did not definitively resolve whether the NFTs constituted securities under their specific contract.

The Core of the Conflict

The NFLPA's lawsuit contended that DraftKings' decision to repudiate the license agreement was driven by the cooling market for NFTs. The union's complaint stated, "The impetus for DraftKings' decision to repudiate its license agreement with Plaintiffs is simple: the once white-hot market for NFTs has cooled down. Buyers' remorse, however, is not a basis to terminate a contract."

In response, DraftKings maintained that the termination was "expressly permitted by several provisions in the agreement."

Key Takeaways

• The settlement resolves a significant legal dispute between a major sports-betting company and a prominent players' union over the burgeoning NFT market.

• The case highlighted the legal complexities surrounding NFTs, particularly their classification as potential securities.

• The cooling market for NFTs played a role in DraftKings' decision to terminate its agreement, as alleged by the NFLPA.

Legal Representation

• For the NFLPA: Jeffrey Kessler, Dave Greenspan, and George Mastoris of Winston & Strawn.

• For DraftKings: Orin Snyder, Grace Hart, Jacob Spencer, and Matthew Benjamin of Gibson Dunn & Crutcher.

Sources

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