Key Takeaways:
DraftKings agreed to settle a lawsuit alleging it sold unregistered securities through its NFT marketplace, marking a key legal development in the NFT space. The case showcases the ongoing uncertainty surrounding the classification of NFTs as securities and the regulatory challenges faced by companies in the industry. Broader market turbulence continues to impact NFTs, but recent legal wins for platforms like OpenSea signal potential optimism for the sector’s future.DraftKings has reached a $10 million settlement to resolve allegations that it sold unregistered securities via its NFT marketplace, according to court filings on Wednesday.
If approved, the settlement will provide compensation to individuals who traded NFTs on DraftKings’ platform between August 11, 2021, and the final judgment date.
How Did DraftKings Get Here In The First Place?
The lawsuit, filed in March 2023, alleged that DraftKings violated federal and Massachusetts securities laws by selling unregistered securities through its NFT platform and running DK Marketplace as an unregistered securities exchange.
According to the plaintiffs, DraftKings generated revenue from initial NFT sales and took a 5% commission on secondary market transactions.
In July 2024, U.S. District Judge Denise J. Casper rejected DraftKings’ motion to dismiss, allowing all claims to move forward.
Following the ruling, DraftKings shut down its NFT marketplace, which rendered many NFTs illiquid.
Investors voiced frustration as the company offered only partial compensation for some losses.
After extensive negotiations, including third-party mediation, the lawsuit resulted in a proposed $10 million settlement.
If approved by the court, the funds will compensate investors who bought or sold DraftKings NFTs between August 2021 and the settlement date, also covering attorneys’ fees and litigation expenses.
DraftKings and the NFLPA Settlement: A Related Dispute
This controversy is not an isolated incident for DraftKings.
In a separate but related dispute, the company faced legal action from the National Football League Players Association (NFLPA) over unpaid royalties linked to NFTs featuring player likenesses.
DraftKings had partnered with the NFLPA in 2021 to create collectible NFTs for its fantasy sports game Reignmakers.
Following a federal court ruling that categorized NFTs as securities, DraftKings stopped paying royalties in 2023, citing legal concerns.
The NFLPA sued DraftKings in August 2024, seeking damages reportedly up to $65 million, though the exact amount was redacted in filings.
In January 2025, just weeks before the Super Bowl—a key event for crypto-related advertising in past years—DraftKings and the NFLPA reached a mediated settlement in principle.
Both parties requested a 60-day stay to finalize the agreement by March 28, 2025.
This resolution showcases ongoing challenges in balancing intellectual property rights with the stringent regulatory landscape of NFTs.
The Broader NFT Market Decline And Hope For Rebound
Once a booming sector, the NFT market has struggled in recent years due to declining sales, regulatory scrutiny, and shifting investor sentiment.
However, recent trends suggest a potential rebound as the industry adapts to a more regulated landscape.
NFT sales have dropped sharply from their 2021 peak. In 2024, total sales reached $8.83 billion—a modest 1.1% increase from 2023 but still far below the 2022 high of $23.7 billion.
Ethereum and Bitcoin led with $3.1 billion each, followed by Solana at $1.4 billion.
Despite the market’s decline, December 2024 showed signs of recovery, with $877 million in sales driven by Ethereum-based collections like Pudgy Penguins and CryptoPunks.
However, momentum slowed in early 2025, as January sales fell to $677.73 million across 5.4 million transactions, according to CryptoSlam.
Regulatory uncertainty has also weighed on the market. The U.S. Securities and Exchange Commission (SEC) investigated NFT platforms like OpenSea in 2024, raising concerns over securities classifications.
However, February 2025 brought a turning point: the SEC closed its investigation into OpenSea without pursuing legal action or classifying NFTs as securities.
The closure follows the SEC’s similar decision to drop its lawsuit against Coinbase, suggesting a possible shift in the regulator’s stance on crypto-related enforcement.
As regulatory frameworks evolve, NFT platforms must navigate compliance challenges while retaining user engagement and innovation. Whether the industry can adapt to these shifts will shape its long-term viability.
Frequently Asked Questions (FAQs)
DraftKings’ NFT marketplace faced reputational damage due to allegations of selling unregistered securities, legal disputes, and the abrupt shutdown of its platform, leaving many NFTs worthless.
The plaintiffs argued that DraftKings’ NFTs qualified as unregistered securities under the Howey Test and accused the company of operating an unregistered securities exchange while profiting from NFT sales and commissions.
The settlement could set a precedent for stricter regulatory compliance in future NFT marketplaces and highlights the risks of operating without clear legal frameworks.
Legal uncertainties led DraftKings to halt royalty payments to the NFLPA, citing contract clauses triggered by the classification of NFTs as securities, which strained their partnership.
DraftKings resolved the lawsuit with the NFLPA through mediation, reaching a settlement agreement to avoid prolonged litigation over unpaid royalties and contract breaches.
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