DraftKings has agreed to a $10 million settlement to resolve a class action lawsuit challenging its NFT Marketplace and Reignmakers product. The lawsuit, which accused the company of offering unregistered securities, had been ongoing for nearly 18 months before both parties reached a resolution.

The legal dispute, initiated by lead plaintiff Justin Dufoe in March 2023, centered on allegations that DraftKings’ NFTs functioned as securities under U.S. law but were not properly registered. Dufoe filed the case in the U.S. District Court for the District of Massachusetts, naming not only DraftKings but also CEO Jason Robins, North America President Matt Kalish, and Chief Transformation Officer Jason Park as defendants.

Legal Challenges and Marketplace Shutdown

DraftKings attempted to dismiss the lawsuit, arguing against the claims, but the effort was unsuccessful. In July 2024, U.S. District Judge Denise J. Casper ruled against the motion to dismiss, stating that the allegations had merit under the Howey Test, a legal benchmark used to determine whether financial instruments qualify as investment contracts.

Following the court’s decision, DraftKings shut down its NFT Marketplace and its fantasy gaming product, Reignmakers. The company attributed the closure to “recent legal developments,” though investors criticized the move, particularly as some NFT holders were offered only partial compensation for their losses.

The decision to discontinue the platform also led to additional legal disputes. The NFL Players Association (NFLPA), which had partnered with DraftKings to create NFTs featuring player likenesses for Reignmakers, filed a separate lawsuit in August 2024 over unpaid royalties. That dispute was later settled in January 2025, ahead of the Super Bowl.

Settlement Terms and Class Member Eligibility

Dufoe has now filed a motion for preliminary approval of the $10 million settlement, which aims to compensate DraftKings customers who transacted in NFTs on the platform. According to court filings, the settlement class includes all individuals or entities that purchased, sold, held, or otherwise used DraftKings NFTs between August 11, 2021, and the final date of judgment.

The settlement fund will be distributed to class members based on a predetermined allocation plan and will also cover attorney fees, litigation expenses, and administrative costs. Court documents indicate that administrative expenses will be capped at $300,000, approximately 3% of the total settlement amount.

Estimates suggest that around 175,000 individuals could qualify for compensation. Additionally, Dufoe has requested a service award of up to $50,000 for his role in pursuing the case on behalf of the class.

Impact on the NFT Industry and Future Regulations

This case adds to the growing legal scrutiny surrounding NFTs and their classification under U.S. securities laws. The lawsuit against DraftKings highlights the broader regulatory uncertainties that NFT platforms continue to face, with legal precedents evolving as courts weigh in on whether digital assets should be treated as securities.

Attorney Sarah Flohr, representing Dufoe, quoted by SBC Americas, emphasized the significance of the settlement, stating, “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 court has yet to grant preliminary approval for the settlement, which would enable formal notice to be sent to class members. If approved, the settlement could influence future compliance strategies for NFT platforms, as companies navigate the evolving regulatory landscape.