Three years after launching, DraftKings has announced it is shuttering its NFT Marketplace effective immediately.
DraftKings launched the venture in 2021 on the Polygon-powered solution which was working off the Ethereum platform. Then, in March 2022, the company announced the launch of Reignmakers, an initiative that allowed users to compile NFTs of a given athlete to enter into fantasy sports contests. In 2022 the company brought on DJ Steve Aoki to market the venture with a specific focus on Reignmakers.
DraftKings Marketplace and Reignmakers shutting down immediately
On Tuesday, the NFT Marketplace posted on its website that it will be ceasing operations effective immediately. Per the website, customers still holding Reignmaker digital game pieces will be able to return them to DraftKings for cash compensation.
“It has always been in DraftKings’ DNA to innovate and disrupt in order to provide the best possible gameplay experiences for our customers. Reignmakers and our NFT Marketplace saw immediate success upon launch, and we are proud of what we accomplished in such a short time. After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments,” a DraftKings spokesperson told SBC Americas.
“This decision was not made lightly, and we believe it is the right course of action. NFTs and Reignmakers digital game pieces will remain accessible and transferable (subject to limited exceptions that we are diligently working through) as this transition gets underway and we will continue to update our player community. We value the trust that our customers place in us.”
Class action related to DraftKings NFTs moving forward
The decision comes less than a month after a Massachusetts District Court judge denied DraftKings’s motion to dismiss a class action lawsuit brought against it for its NFT Marketplace products.
Plaintiff Justin Dufoe first filed the lawsuit in March 2023 but it took until July of this year before the judge denied DraftKings’s motion to dismiss. In addition to suing DraftKings, the complaint also names CEO Jason Robins, DraftKings North America President Matt Kalish and Jason Park, the former CEO who now serves as the company’s Chief Transformation Officer.
In the complaint, Dufoe alleges that the NFT Marketplace and its tokens amounted to unregistered securities.
In the written dismissal, Judge Denise J Casper determined that Dufoe’s charges against the company and the marketplace have merit.
In making this determination, Casper invoked the Howey Test, which is a legal framework to determine if something amounts to an investment contract.
The test looks at if there is an investment of money, if the investment is in a common enterprise and if there is an expectation of profit derived solely from the efforts of a promoter or a third party.
Casper noted that the first element was not even up for debate and determined that the NFT Marketplace satisfied the other two elements as well. In that determination, Casper noted that DraftKings controlled the marketplace and, though people could put their NFTs in external wallets, there is no evidence anyone had, so the cessation of the marketplace would impact those with DraftKings NFTs.
Casper also noted that DraftKings spokespeople and DraftKings content, including a podcast featuring Kalish and entrepreneur Gary Vaynerchuk conveyed to listeners that the investment into these tokens were more than just about entertainment and collectibles and were money-making opportunities.
The class action continues to move forward in court, but the days of DraftKings venturing into NFTs appear to be over for now.
