DraftKings Settles NFT Securities Lawsuit for $10 Million

DraftKings has reached a $10 million settlement to resolve a lawsuit alleging the company sold unregistered securities through its NFT marketplace. The settlement, announced on Wednesday, addresses claims that DraftKings violated both federal and Massachusetts securities laws by operating the DK Marketplace as an unregistered securities exchange, and selling NFTs that could be classified as securities.

The lawsuit, filed in March 2023, accused DraftKings of profiting from initial NFT sales and taking a 5% commission on secondary market transactions, without properly registering these NFTs as securities. The case gained momentum when U.S. District Judge Denise J. Casper ruled in July 2024 to allow the lawsuit to proceed, rejecting DraftKings' motion to dismiss.

In response to the ongoing legal challenges, DraftKings shut down its NFT marketplace in the summer of 2024, making many NFTs illiquid. Investors expressed frustration, leading to negotiations and mediation that ultimately resulted in the $10 million settlement. If approved by the court, the settlement will provide compensation to individuals who bought or sold NFTs on the DraftKings platform between August 2021 and the date of the settlement's final judgment. The funds will also cover attorneys' fees and litigation expenses.

This settlement highlights the growing regulatory scrutiny surrounding NFTs and the ongoing debate about whether they should be classified as securities. DraftKings' involvement in a separate legal dispute with the NFL Players Association (NFLPA) further emphasizes the complexities of the evolving NFT space, particularly as NFTs become more integrated into broader commercial and entertainment sectors.

The NFT market has faced significant challenges in recent years, with sales sharply declining from their peak in 2021. Total NFT sales in 2024 were $8.83 billion, a modest 1.1% increase from the previous year, but still far below the 2022 high of $23.7 billion. The drop in sales has been attributed to a combination of regulatory uncertainty, declining investor interest, and market saturation.

Despite these struggles, there are signs of recovery. In December 2024, Ethereum-based collections like Pudgy Penguins and CryptoPunks drove a surge in sales, totaling $877 million. However, sales slowed again in early 2025, dropping to $677.73 million in January.

The U.S. Securities and Exchange Commission (SEC) has been investigating NFT platforms like OpenSea, with concerns over the classification of NFTs as securities. However, in a significant turn of events, the SEC closed its investigation into OpenSea in February 2025, without pursuing legal action or classifying NFTs as securities.

The DraftKings settlement and other ongoing legal battles indicate that while the NFT market may still be struggling, it is also evolving in response to regulatory pressures. As the industry adapts to a more regulated landscape, NFTs may find new avenues for growth—though the outcome remains uncertain as legal frameworks continue to take shape.

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