DraftKings Settles NFT Lawsuit for $10M

DraftKings, a leading online sports betting and fantasy sports platform, has reached a settlement agreement in a class-action lawsuit related to its non-fungible token (NFT) marketplace. The company has agreed to pay $10 million to resolve the claims brought by buyers of its NFTs, which were sold through the now-defunct marketplace.

On February 28, Judge Denise Casper of the Boston federal court granted a preliminary settlement motion filed by lead plaintiff Justin Dufoe and the class. The settlement will see the $10 million distributed among the class action's members. Additionally, Dufoe anticipates seeking a $50,000 award for his time and effort in litigating the case, along with attorneys' fees of up to one-third of the settlement fund plus litigation expenses.

The nearly fully approved settlement is close to concluding the lawsuit, which was first filed in March 2023. The suit alleged that the NFTs sold by DraftKings were investment contracts under US law and, therefore, were offered as unregistered securities. The class group argued that allowing the settlement would avoid "costly litigation" that could take years.

The lawsuit also named DraftKings co-founders Jason Robins and Matt Kalish, along with finance boss turned chief transformation officer Jason Park. Dufoe claimed to have lost $14,000 by selling DraftKings NFTs on the company's DK Marketplace at a loss and by holding NFTs that had lost value.

In September 2023, DraftKings filed to dismiss the suit, claiming the NFTs weren't investment contracts under the securities-defining Howey test. However, Judge Casper rejected this argument in July, stating that the NFTs could be considered securities. Later that same month, DraftKings shut down its NFT marketplace, citing "recent legal developments." The class settlement motion claimed that the shuttered marketplace made "the NFTs worthless," and DraftKings "offered certain NFT investors a fraction of what they had invested in the NFTs."

Following the marketplace's closure, DraftKings and the class group began settlement discussions, which eventually led to an "all-day mediation" involving rigorous negotiations before a neutral third party. The resulting agreement was described as an "outstanding result" that would "avoid continued and