In a significant development for the digital asset and sports betting industry, DraftKings has agreed to a $10 million cash settlement to resolve an 18-month-long class action lawsuit surrounding its now-defunct Reignmaker NFT marketplace. The lawsuit alleged that DraftKings sold unregistered securities in the form of digital trading cards, resulting in financial losses for buyers. While the agreement still requires court approval, it aims to compensate affected users and avoid protracted litigation. This case highlights the regulatory gray areas in the NFT market and sets a precedent for future disputes in the digital asset sector.

Legal Dispute and Allegations Against DraftKings

The lawsuit, initially filed in March 2023, accused DraftKings of selling unregistered securities through its NFT-based digital trading cards, violating U.S. federal and state securities laws. The plaintiffs argued that these digital assets met the legal definition of investment contracts, which should have required formal registration with regulators.

Moreover, the lawsuit named key DraftKings executives, including co-founders Jason Robins and Matt Kalish, as well as Jason Park, another company leader, alleging that they were fully aware of the securities-like nature of the NFTs but proceeded with sales regardless.

Regulatory Uncertainty in the NFT Space

The Reignmaker NFT marketplace, launched in August 2021, allowed users to purchase, trade, and use digital trading cards featuring professional athletes. However, like many NFT projects, it operated in an ambiguous regulatory environment, where the legal status of NFTs remains a gray area.

The plaintiffs claimed that DraftKings made hundreds of millions of dollars by selling these unregistered digital assets without disclosing the risks to consumers. Given the evolving legal scrutiny on digital collectibles, this lawsuit underscores the challenges faced by companies navigating the intersection of blockchain technology and financial regulation.

Settlement Terms and Compensation Structure
On February 28, 2025, Boston federal Judge Denise Casper granted preliminary approval for the $10 million settlement after lead plaintiff Justin Dufoe filed a motion two days earlier. However, as with most settlements, the final payout will be reduced due to various deductions.

Breakdown of Settlement Fund
The $10 million settlement will be allocated as follows:

Compensation for Class Members – Affected customers who transacted with DraftKings NFTs between August 11, 2021, and the settlement judgment date will receive payouts.
Legal Fees – Attorneys representing the plaintiffs could claim up to one-third of the total settlement.
Administrative Costs and Taxes – A portion of the fund will cover court-related expenses, tax obligations, and distribution administration.
Service Award for Lead Plaintiff – Justin Dufoe, the lead plaintiff, will receive a $50,000 service award for his role in the case.
While some critics argue that the $10 million settlement is relatively low compared to the potential damages estimated between $18 million and $58 million, the plaintiffs view this as a pragmatic resolution that avoids a prolonged legal battle.

Impact on DraftKings and the NFT Industry

Legal Precedent for NFT Marketplaces
This settlement could have wider implications for the NFT industry, as it may signal a growing regulatory crackdown on unregistered securities in digital asset markets. Companies operating NFT marketplaces may now face heightened scrutiny regarding how they classify and market digital collectibles.

DraftKings' Response and Future Outlook
For DraftKings, this is the second major NFT-related legal settlement in 2025. In January, the company resolved a separate dispute with the NFL Players Association for an undisclosed amount.

Despite these legal challenges, DraftKings remains a dominant force in the sports betting and fantasy gaming sector. The company may now take a more cautious approach to future NFT and blockchain initiatives, focusing on regulatory compliance and consumer protections to avoid further litigation.

Who Qualifies for Compensation?

The settlement class includes all individuals and entities that transacted with DraftKings NFTs between August 11, 2021, and the final judgment date. This includes:

Buyers who purchased or acquired NFTs through DraftKings.
Individuals who sold or disposed of NFTs via the platform.
Users who owned NFTs within their DraftKings account during the period in question.
More than 175,000 class members are estimated to qualify for compensation, though the exact payout per claimant remains uncertain.

Final Thoughts: A Warning for Digital Asset Companies

The DraftKings NFT settlement is a cautionary tale for companies operating in the rapidly evolving world of digital assets. It highlights the risks of launching NFT-based platforms without clear regulatory compliance and the financial consequences of failing to register digital assets that could be interpreted as securities.

As global regulators tighten their grip on NFTs and blockchain-based financial instruments, companies must ensure that their digital offerings align with legal frameworks to avoid costly legal disputes. For investors and traders, this case serves as a reminder to exercise due diligence before engaging with NFT marketplaces, as legal battles could significantly impact the value and usability of digital assets.

While DraftKings' settlement may close this chapter, it opens up a broader conversation about how NFTs will be classified and regulated in the years ahead.