After an 18-month legal battle, DraftKings has agreed to a $10 million settlement to resolve a class action lawsuit challenging its NFT Marketplace and Reignmakers product.
The lawsuit, filed in 2023 by plaintiff Justin Dufoe in the U.S. District Court for the District of Massachusetts, alleged that DraftKings’ NFTs and tokens constituted unregistered securities.
Dufoe also named DraftKings CEO Jason Robins, DraftKings North America President Matt Kalish, and Chief Transformation Officer Jason Park in the suit.
According to court documents, Dufoe has filed a motion for preliminary approval of the settlement on behalf of himself and others affected by DraftKings’ NFT operations.
DraftKings’ failed attempt to dismiss the case
DraftKings attempted to have the lawsuit dismissed, but a Massachusetts District Court judge denied the motion.
The judge, Denise J. Casper, ruled that Dufoe’s claims had merit under the Howey Test, a legal standard used to determine whether a transaction qualifies as an investment contract.
Following the denial of its motion, DraftKings ceased operations of its NFT marketplace and Reignmakers, a fantasy gaming product utilizing NFTs.
The company originally launched its NFT marketplace in 2021 and introduced Reignmakers the following year.
Settlement details: Who’s eligible and what’s next?
DraftKings has agreed to a $10 million settlement fund to compensate affected customers, cover attorney fees, and handle administrative costs.
The settlement class includes individuals and entities who purchased, acquired, sold, held, or transacted in DraftKings NFTs during the class period, which runs from August 11, 2021, through the entry of judgment.
An estimated 175,000 people could be eligible for compensation. Legal fees and expenses will be covered within the settlement, with notice and administration costs capped at $300,000.
Additionally, Dufoe has requested a service award of up to $50,000 for his role in litigating the case on behalf of the class members.
Legal team calls settlement a ‘significant victory’
Attorney Sarah Flohr, who represented Dufoe, highlighted the extensive legal process that led to 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,” Flohr stated.
