Posted on: July 30, 2024, 02:01h.
Last updated on: July 30, 2024, 02:01h.
DraftKings (NASDAQ: DKNG) announced today that it is closing its non-fungible token (NFT) marketplace and halting the Reignmakers fantasy sports game that was based on those NFTs.
An ad for DraftKings Reignmakers. The gaming company is shuttering that fantasy game as well as its NFT marketplace. (Image: DraftKings Network)
The news arrived as the gaming company faced mounting legal challenges regarding the status of NFTs as investable securities, which could have made it liable in class action litigation. Earlier this month, US District Judge Denise Casper ruled that a suit against DraftKings could move forward because NFTs fit the bill as securities.
In her decision, Casper ruled that plaintiffs met the standard for the Howey Test, a more than six-decade-old Supreme Court ruling that defined precedent for investment of money, expectation of profits, common enterprise, and investment success dependent upon parties beyond the individual investor.
The suit was filed in March 2023 in US District Court in Boston was brought by Illinois resident Justin Dufoe who claimed he lost $14,000 on NFTs purchased on DraftKings Marketplace. It’s not clear what the outcome of the trial would have been had the case gone that far, but the gaming company pledged to provide some compensation to Reignmakers participants.
“We have decided to offer all holders of Reignmakers digital game pieces the opportunity to relinquish those game pieces to DraftKings in exchange for a cash payment (subject to certain conditions). The payment amount will be based on factors that include, but are not limited to, the relative size and quality of your digital game piece collection,” according to social media post by the gaming company.
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