- A class-action lawsuit against DraftKings has resulted in a proposed $10 million settlement
- The case alleges DraftKings sold unregistered securities in the form of NFTs and operated an unregistered securities exchange
- A federal judge must now approve the preliminary settlement, which aims to compensate affected investors
DraftKings has reached a proposed $10 million settlement in a class-action lawsuit alleging the company sold unregistered securities through its NFT marketplace. The lawsuit, led by plaintiff Justin Dufoe, claims DraftKings violated federal and state securities laws by offering and selling NFTs without proper registration and operating an unregulated exchange. A federal court will now review the settlement for preliminary approval, determining whether affected investors will receive compensation.
Judge Denied DraftKings’ Dismissal Attempt
The lawsuit, filed in March 2023, centers on DraftKings’ NFT marketplace, where digital assets were sold and traded. Plaintiffs alleged that the platform functioned like a stock exchange, allowing users to buy and sell NFTs under DraftKings’ control. The company earned revenue through initial NFT sales and secondary transactions, charging a commission on each trade.
In July 2024, U.S. District Judge Denise J. Casper denied DraftKings’ motion to dismiss the case, ruling that the claims had sufficient legal merit to proceed. Shortly after, DraftKings abruptly shut down its NFT marketplace, rendering the digital assets worthless. Investors alleged this move was an attempt to limit liability as the legal case advanced.
$10 Million Agreement
According to court documents, the parties have reached a $10 million settlement following months of negotiations. The settlement fund will cover compensation for affected investors, attorney fees, and administrative costs, with lead plaintiff Dufoe also potentially receiving a service award of up to $50,000 for his role in the litigation.
“The settlement is fair, reasonable, and in the best interest of the class,” Dufoe’s attorneys stated in the court filing, highlighting the risks of prolonged litigation. They also noted that continued legal battles could result in a lower recovery or no compensation at all for investors.
Under the proposed terms, class members who purchased, sold, or held DraftKings NFTs during the class period—August 11, 2021, through the settlement approval date—will be eligible for compensation. The exact payout will depend on the number of claims submitted.
Court Approval Will Seal the Deal
The settlement now awaits preliminary approval from the court, which, if given, will see class members receive notifications about their rights, including the ability to object or opt out of the agreement. DraftKings has not admitted wrongdoing but has agreed to settle to avoid further legal costs.
A final approval hearing will be scheduled after this process.
