DraftKings Reaches $10 Million Settlement in NFT Lawsuit

DraftKings Settles Lawsuit Over NFT Marketplace for $10 Million

By Amelia Walker Senior Content Writer Updated: 12 March 2025

Amelia Walker Senior Content Writer

Amelia Walker is a Senior Content Writer at Betting.US. She has a law degree and deep knowledge of the gambling laws in the United States. Her mission is to keep players informed about responsible gambling, while her passion for sports helps her create useful guides. Amelia has over a decade of experience in betting, which has positioned her as a trusted voice among our readers.

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Legal Challenges and NFT Shutdown

Lead plaintiff Justin Dufoe initiated the dispute in March 2023. It was centered around allegations that DraftKings’ NFTs were not registered but were functioning as securities under US law. Dufoe named not only DraftKings as the defendants, but also CEO Jason Robins, North American President Matt Kalish, and Chief Transformation Officer Jason Park.

July 2024 saw a significant turning point in the case when Judge Denise J. Casper denied DraftKings’s motion to dismiss in its entirety, allowing all the plaintiffs’ claims to proceed. She stated that the allegations had merit under the Howey Test, which is a legal benchmark used to determine whether financial instruments qualify as investment contracts.

DraftKings shut down its NFT marketplace shortly after the ruling, rendering the NFTs worthless. The company said the closure was due to “recent legal developments”. Certain NFT investors were only offered a fraction of their original investment.

Closure in the marketplace also saw litigation from the NFL Players Association, which had partnered with DraftKings to create NFTs featuring player likenesses for Reignmakers, their connected daily fantasy game. They filed a lawsuit over unpaid royalties; the dispute was settled in January before the Super Bowl.

Settlement Terms

Dufoe filed a motion for preliminary approval of the $10 million settlement to compensate customers who transacted in NFTs on the platform. This includes everybody who purchased, sold, held, or used DraftKings NFTs between August 11, 2021, and the final date of judgment.

The $10 million 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. It is estimated that around 175,000 people qualify for compensation.

Dufoe’s attorney, Sarah Flohr, 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.