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DraftKings has announced the immediate shutdown of its non-fungible token (NFT) business. The company informed its customers via email, concluding its venture into the intersection of digital collectibles and sports culture.
The email stated, “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 legal complications for DraftKings began to surface weeks ago when a federal judge allowed a class action lawsuit against the company to move forward. The lawsuit alleges that DraftKings’ NFTs were unregistered securities. The judge found that the plaintiffs had “plausibly pled” their case.
DraftKings ventured into the NFT market in mid-2021. The company observed that its “golden” customers were increasingly interested in digital collectibles, inspired by projects like NBA Top Shot, such as the March Madness “2022 College Hoops NFT Collection”. However, the enthusiasm around NFTs soon led to legal troubles.
This year, DraftKings faced multiple class action lawsuits accusing the company of violating securities laws through its NFT sales. Similar allegations have also affected other sports-themed NFT companies. In June, NBA Top Shot resolved its own legal issues with a $4 million settlement.
Court records suggest that the class action lawsuit against DraftKings is likely headed to trial. In response to the legal challenges, DraftKings decided to shut down its NFT operations. The company is offering buyouts to Reignmakers players as part of the shutdown. Despite the closure, NFT collectors will still be able to access and transfer their collections.