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DraftKings has agreed to pay $10 million due to allegations of violating federal securities laws related to its NFT transactions. The settlement includes payments for legal expenses, court costs, and compensation for those deemed victims. A final approval hearing is expected to occur by the end of the year.
Details of the $10 Million Settlement
The lawsuit was initiated in 2023 by Justin Dufoe, claiming that DraftKings sold NFTs as unregistered securities. The court had previously rejected the company’s request for dismissal, leading both parties to reach a settlement to avoid prolonged litigation and associated legal risks.
Under the agreement, individuals who purchased, sold, or used DraftKings NFTs are considered “class members.” Compensation payments will be determined based on the court’s final approval. This legal process aims to mitigate risks for both parties and reduce uncertainties surrounding the case.
Closure of Reignmakers and Cash Alternative Offered
DraftKings’ NFT-based sports product, Reignmakers, provided users with opportunities to participate in daily sports contests. The platform achieved over 10 million transactions and a total volume exceeding $280 million, but it was shut down due to legal issues.
Users have been given the option to transfer their NFTs to wallets or redeem them for cash. NFTs that are not claimed for cash by a certain date will become invalid. Company officials stated that this process was established to prevent user grievances.
DraftKings management commented on their innovative entry into the NFT-based sports world, achieving significant milestones. However, the ongoing uncertainties about how NFT transactions will be evaluated within the current legal framework complicate the situation. This development has reignited discussions regarding whether NFTs are considered securities.
