DraftKings, a sports betting and daily fantasy sports (DFS) company, has reached a $10 million settlement to resolve a lawsuit over its non-fungible token (NFT) sales, which investors claimed were unregistered securities.
The case, led by Justin Dufoe, was filed in March 2023 after he allegedly lost $14,000 from trading DraftKings NFTs. The lawsuit accused the company of offering these digital assets as investment contracts without proper registration under US law.
It also named co-founders Jason Robins and Matt Kalish, along with former finance chief Jason Park, as defendants.
Did you know?
Subscribe – We publish new crypto explainer videos every week!
What Is Chia? | Crypto Finally Explained
DraftKings pushed to have the lawsuit dismissed, arguing that its NFTs did not meet the legal definition of securities under the Howey test. However, in July 2023, Judge Denise Casper ruled that the tokens could be classified as securities, allowing the case to proceed. Later, DraftKings shut down its NFT marketplace, citing legal concerns.
According to the lawsuit, this decision rendered the NFTs worthless, with the company allegedly offering buyers only a fraction of their original investments.
Settlement discussions began following the platform’s closure, leading to an “all-day mediation” session between both parties. The agreement outlines that the $10 million fund will be distributed among affected investors. Dufoe plans to request $50,000 for his involvement in the case, while attorneys could claim up to one-third of the total amount in legal fees.
The legal team behind the lawsuit considers the settlement a fair outcome, avoiding a lengthy and costly court battle. Estimates suggest potential damages ranged from $18 million to $58 million, meaning the final settlement covers about 26% of the midpoint.
Meanwhile, Justin Sun and the Securities and Exchange Commission (SEC) have requested a 60-day pause in their legal case. Why? Read the full story.
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.
