DraftKings has agreed to a $10m settlement after it was accused in a lawsuit of funnelling unregistered digital assets on its now closed NFT Marketplace.
Justin Dufoe filed the lawsuit back in 2023 accusing the US sports betting company of providing its customers unregistered securities, financial instruments that should be registered with the US Securities and Exchange Commission.
The lawsuit against DraftKings was also filed against its CEO Jason Robins, North America President Matt Kalish and Chief Transformation Officer Jason Park over alleged unregistered securities circulating across the NFT Marketplace.
Despite DraftKings closing its NFT Marketplace and Reignmaker product in July 2024, leading to wider discussions over the decline of NFT adoption, it was currently battling the Dufoe lawsuit.
DraftKings attempted to have the suit thrown out but a judge from the Massachusetts District Court denied the motion and led to an ongoing 18 month battle.
Judge Denise J. Casper ruled in favour of the suit after deeming Dufoe’s claims against the betting operator to be within merit and highlighted the Howey Test which is used in investment contracts cases.
Ultimately, DraftKings agreed to a $10m settlement in cash to be compensated to Dufoe and others who have been impacted.
Attorney Sarah Flohr commented on the settlement: “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.”
The $10m fee will be distributed to pay class members, attorney fees and expenses. It will also be paid to investors affected by DraftKings’ NFT Marketplace, classed 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”.
