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Sports betting platform DraftKings has shut down its nonfungible token business effective immediately due to recent “legal developments.”
It comes four weeks after a federal court judge denied a motion to dismiss from DraftKings related to a class action lawsuit alleging the <a href="https://cointelegraph.com/learn/what-are-nfts-and-why-are-they-revolutionizing-the-art-world" rel="noopener noreferrer nofollow">DraftKings-issued NFTs</a> were unregistered securities.
“After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments,” DraftKings reportedly told users in an email.
<blockquote>
 “This decision was not made lightly, and we believe it is the right course of action.”
</blockquote>
NFT collectors of its fantasy sports game Reignmakers will be allowed to access and transfer their assets.
<figure><img src="https://s3.cointelegraph.com/uploads/2024-07/98908dd6-339a-49de-83bf-056df3ce7359.jpg" alt="DraftKings kills NFT business, citing 'legal developments’">
 <figcaption style="text-align: center;">Screenshot of email from DraftKings to end Reignmakers and its NFT marketplace. Source: X
 </figcaption>
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DraftKings launched <a href="https://cointelegraph.com/learn/the-nft-marketplace-how-to-buy-and-sell-nonfungible-tokens" rel="noopener noreferrer nofollow">its NFT marketplace</a> on the Ethereum layer 2 Polygon network during the <a href="https://cointelegraph.com/news/draftkings-marketplace-plans-to-launch-gamified-nft-collection-next-nfl-season" rel="noopener noreferrer nofollow">NFT summer of 2021.</a>
Part of this motivation came from seeing how strongly NBA Top Shot NFTs were being embraced, one of the firm’s founders, Matt Kalish, <a href="https://www.youtube.com/watch?v=k8ZDtcGzakQ" target="_blank" rel="noopener noreferrer nofollow">said</a> in February, 2023.
The firm <a href="https://draftkings.gcs-web.com/news-releases/news-release-details/draftkings-marketplace-and-autograph-instantly-sell-out-entire" target="_blank" rel="noopener noreferrer nofollow">saw</a> “immense” demand from one of its first Tom Brady-themed NFT collectibles, which sold out “immediately.”
But things turned for the worst in March, 2023, when DraftKings customer Justin Dufoe launched a class action against the firm, claiming its NFT met the prongs of the Howey test.
On July 2, the court <a href="https://storage.courtlistener.com/recap/gov.uscourts.mad.254421/gov.uscourts.mad.254421.60.0_2.pdf" target="_blank" rel="noopener noreferrer nofollow">found</a>&nbsp;that Dufoe “plausibly pled” that DraftKings NFTs were investment contracts and thus securities “within the meaning” of the Securities Act and Exchange Act.
Dapper Labs — the issuer of the NBA Top Shot NFTs — faced a similar court case in June, eventually agreeing to <a href="https://cointelegraph.com/news/dapper-labs-settlement-nba-top-shot-nfts-not-securities" rel="noopener noreferrer nofollow">pay $4 million to settle</a> the dispute.
Related:<a href="https://cointelegraph.com/news/nft-adoption-barriers-solutions" rel="noopener noreferrer nofollow"> Web3 experts cite innovation and PR as key challenges for NFT adoption</a>
It comes a day after <a href="https://cointelegraph.com/news/artists-sue-sec-over-confusing-nft-security-status" rel="noopener noreferrer nofollow">two artists sued</a> the US securities regulator seeking clarity on whether NFTs fall under the commission’s authority.
Attorneys representing the artists asked the court whether they need to “register” their<a href="https://cointelegraph.com/learn/how-to-create-an-nft" rel="noopener noreferrer nofollow"> NFT art</a> before<a href="https://cointelegraph.com/news/nfts-lowest-monthly-sales-volume" rel="noopener noreferrer nofollow"> selling it to the public</a> and whether they must make public disclosures about the “risks” of buying their art.
NFTs are set to see their <a href="https://cointelegraph.com/news/nfts-lowest-monthly-sales-volume?utm_source=rss_feed&amp;utm_medium=rss&amp;utm_campaign=rss_partner_inbound" rel="noopener noreferrer nofollow">lowest monthly sales volume</a> since November, 2023 this July, raking in a combined $407.8 million so far this month, <a href="https://www.cryptoslam.io/nftglobal?timeFrame=month&amp;headerPeriod=30d" target="_blank" rel="noopener noreferrer nofollow">according</a> to CryptoSlam’s NFT data tracker.
It marks a 74.6% fall in March, which saw a 2024-record of $1.6 billion sales.
<figure><img src="https://s3.cointelegraph.com/uploads/2024-07/61a95093-083e-44cd-94d6-a3f7fe6968df.png" alt="DraftKings kills NFT business, citing 'legal developments’">
 <figcaption style="text-align: center;">Monthly NFT sales, unique buyers and unique sellers since June, 2017. Source: CryptoSlam
 </figcaption>
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Magazine:<a href="https://cointelegraph.com/magazine/thorchain-founder-jp-thor-vampire-attack-defi/" rel="noopener noreferrer nofollow"> THORChain founder and his plan to ‘vampire attack’ all of DeFi</a>

DraftKings kills NFT business, citing 'legal developments’

Cointelegraph

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