NFL Players Union Takes Legal Action Against DraftKings Over NFT Contract Dispute

The National Football League Players Association (NFLPA) has filed a lawsuit against DraftKings, accusing the sports-betting giant of breaching their contract related to non-fungible tokens (NFTs). The lawsuit, filed in New York federal court, claims that DraftKings failed to pay licensing fees for using NFL player likenesses on NFTs after shutting down its NFT trading-card business last month.

Key Takeaways

• Lawsuit Filed: The NFLPA has sued DraftKings for allegedly breaching their NFT contract.

• Contract Dispute: The dispute centers around DraftKings' refusal to pay licensing fees for NFL player likenesses.

• Market Decline: DraftKings claims the NFT market has cooled, leading to their decision to terminate the contract.

• Legal Implications: A federal judge in Boston suggested that the NFTs might be unregistered securities, complicating the matter further.

Background

In 2021, DraftKings partnered with the NFLPA to create collectible NFTs featuring NFL players. These NFTs could be bought and sold as part of a game on DraftKings' fantasy sports site. However, by the end of the NFL's 2022-2023 season, the NFT market had significantly declined. DraftKings threatened to stop offering NFTs in April, leading the NFLPA to agree to restructure their contract to expand DraftKings' rights to use player likenesses.

Legal Developments

DraftKings argued that the amended contract allows them to terminate the agreement if a court determines that the NFTs are securities. Last month, a federal judge in Boston indicated that the tokens might be unregistered securities during the early stages of a separate class-action lawsuit against DraftKings. Following this, DraftKings informed the NFLPA that it was ending its NFT business and terminating their agreement.

Financial Implications

The NFLPA's 2023 annual report identified $32.4 million owed to them by OneTeam Partners, the company that facilitated the original NFT deal between the Players Association and DraftKings. This revenue was intended to support retirement benefits, health and life insurance, and pension programs for NFL players. The NFLPA's lawsuit aims to recover these funds to continue supporting its members.

Future Outlook

The outcome of this lawsuit could set a precedent for future legal actions involving NFTs and player likenesses. The NFLPA's relationship with OneTeam Partners remains intact, and more lawsuits could follow as the legal landscape around NFTs continues to evolve.

Sources

• NFL players union sues DraftKings for allegedly breaking NFT contract | Reuters, Reuters.

• NFL Players Association Suing DraftKings, Sportsbook Review.