More details are coming forth about the pending litigation between DraftKings and the NFL Players Association.
As rumored, the lawsuit hinges upon DraftKings’ closure of its NFT Marketplace and Reignmaker products. In its complaint against the operator, the NFLPA said the company informed the players’ organization on July 30 that it would be closing down the project and had no plans to pay what was remaining on the contract.
DraftKings notified NFLPA of plans to terminate agreement in July
“Buyers’ remorse, however, is not a basis to terminate a contract,” the complaint read. “Here, DraftKings–a sophisticated and amply-resourced gaming behemoth–assumed the risks inherent in its product save for carefully negotiated and narrow termination grounds.”
According to the filing, DraftKings is arguing that a judge’s ruling to let the class action lawsuit against the company over the NFT marketplace satisfied a termination clause in the agreement that was triggered “if a government, regulatory or adjudicatory body ‘determines’ the the ‘License Porducts’ constitute ‘securities’.”
While the crux of the class action suit filed by Justin Dufoe is that the NFTs amount to an unregulated security, the judge’s decision in the case was merely to deny DraftKings’ motion to dismiss. The case is moving forward and it is certainly possible a ruling could deem the product an unregulated security, but for now, the case is barely underway.
“At the end of the day, and despite DraftKings’ best efforts to muddy the waters, this case is extraordinarily simple. DraftKings’ inability to profitably commercialize the intellectual property it licensed does not excuse performance, and DraftKings must pay what is due,” the complaint continued.
Complaint implies DraftKings owes NFLPA over $60M
Many financial details of the complaint are redacted, but one section of the complaint gives some idea to how much is at stake. The NFLPA noted that the compensation of several DraftKings executives since 2021:
CEO Jason Robins: $82.1 million
President of DraftKings North America Matt Kalish: $62.5 million
DraftKings President of Global Technology and Product Paul Liberman: $62.5 million
Chief Legal Officer for DraftKings R. Stanton Dodge: $27 million
DraftKings CFO Jason Park: $27 million
The document pointed out the total compensation across the five since 2021 (when the NFT Marketplace deal was first inked) amounts to “approximately quadruple” of what DraftKings owes to the NFLPA. Some simple math indicates that is a sum of around $65 million.
The agreement split the deal up into five licensing periods. The first period extended from 2021-23, then the next four each lasted for a year. When the time come in April 2023 for DraftKings to provide a “true up” payment at the conclusion of the first period, the NFLPA alleges that the company was nervous about the waning popularity of the product.
At peak interest in DraftKings NFT Marketplace, some NFTs were fetching as much as $10,000. With the market on the decline, the NFLPA said it did renegotiate some of the terms of the deal despite no legal obligation to do so.
When the next payment date came in April fo this year, DraftKings did not make the planned payment and is said to have threatened to shutter Reignmakers rather than continue the licensing deal. To date, DraftKings has not paid the amount.
The NFLPA is asking the Southern District Court of New York to find DraftKings in breach of the licensing agreement and force the company to pay all unpaid sums owed to the group.
