After an 18-month court battle, DraftKings has agreed to settle the class action challenge to its NFT Marketplace and Reignmaker product.
According to court documents filed in the U.S. District Court for the District of Massachusetts, Justin Dufoe filed a motion for preliminary approval of a class action settlement of $10 million in cash on behalf of himself and others similarly situated.
DraftKings approved the settlement terms.
Dufoe filed lawsuit against DraftKings in 2023 alleging that the sports betting and daily fantasy giant provided NFTs and tokens through its marketplace that amounted to unregistered securities. In addition to DraftKings, Dufoe also included DraftKings CEO Jason Robins, DraftKings North America President Matt Kalish and the company’s Chief Transformation Officer Jason Park in the suit.
DraftKings failed to have lawsuit dismissed
DraftKings made an attempt to have the suit thrown out but a Massachusetts District Court judge denied the operator’s motion to dismiss the suit leading it to shutter operations of its NFT marketplace and Reignmakers, a fantasy-based gaming product that used NFTs.
DraftKings launched its NFT marketplace in 2021 and a year later debuted Reignmakers.
Judge Denise J. Casper denied DraftKings’ motion to dismiss after determining Dufoe’s claims against the operator and its leadership have merit. Casper made the determination by leveraging the Howey Test, which is deployed to identify investment contracts.
DraftKings has been hit with a hefty settlement despite its motion to dismiss the suit.
“This outstanding result was reached only after a thorough investigation of the claims, fully briefing defendants’ motion to dismiss, discovery in advance of the mediation, an all-day mediation, which involved rigorous and extensive negotiations before a neutral third party and continued confirmatory discovery and information sharing,” said Attorney Sarah Flohr.
Around 175K people could receive settlement
Dufoe and his counsel consider the settlement fair and reasonable. The settlement also provides relief to a certain class of DraftKings customers who held NFTs.
The motion defines the settlement class as “all persons or entities who purchased, acquired, sold, disposed of, owned, held, used, or otherwise transacted in NFTs in a DraftKings account during the class period, including, without limitation, marketplace NFTs.” The class period runs from Aug. 11, 2021, through the date of entry of judgment.
The settlement creates a $10 million fund for the release of the claims made against DraftKings. It will be used to pay each class member, attorney fees and expenses.
Notice and administration costs will be capped at $300,000, roughly 3% of the fund. Dufoe’s counsel projects that there are over 175,000 class members based on discovery.
Dufoe has also asked the court to approve a service award of up to $50,000 as compensation for his “effort litigating the case for the benefit of the settlement class.”
