Facing Legal Risks, DraftKings Shutters NFT Arm

DraftKings continues to downsize. 

A week after selling streaming outlet VSiN back to Musburger Media, the sports gambling giant is shutting down its non-fungible token business, commonly known as NFTs. The decision was announced in an email to customers. 

“After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments. This decision was not made lightly, and we believe it is the right course of action,” the email said.

The decision comes weeks after a judge allowed a class action lawsuit against DraftKings to proceed after discovering plaintiffs “possibly pled” that the company’s NFTs were unregistered securities, according to Westlaw Today. 

DraftKings launched its NFT space at the height of the craze in 2021, doing a deal with Tom Brady’s own NFT company the following year.

The NFT market began to crater in 2022, but DraftKings stuck with it through Reignmakers, a fantasy sports game that allowed users to invest in NFTs and have them compete against one another in daily fantasy sports contests. This year, DraftKings was hit with a lawsuit alleging its NFT sales violated securities laws, a charge many other NFT platforms have also faced. In June, for example, NBA Top Shot settled a lawsuit for $4 million over similar accusations. 

DraftKings’ lawsuit appears to be headed for trial, after a judge recently denied a motion to dismiss the case. The company is offering buyouts to customers playing Reignmaker, while NFT collectors will still have access to their collections.