DK (DraftKings) ends NFT (Non-Fungible Token) operations due to ongoing class action lawsuit
In a significant move, DraftKings has announced the discontinuation of its non-fungible token (NFT) business, effective immediately. This decision comes amidst increasing regulatory and legal challenges, particularly in the realm of securities laws.
The legal developments are rooted in a class action lawsuit against DraftKings, which alleges that its NFTs breached US securities laws. The lawsuit applies the Howey Test, a standard for determining whether an asset qualifies as a security, to NFTs. This case is part of a broader trend of increased regulatory and enforcement attention on crypto assets by the SEC and related authorities.
The Federal judge has allowed the class action lawsuit against DraftKings to continue on a "plausible pled." The court's decision signifies a willingness to scrutinize NFTs and similar crypto assets through securities regulation lenses. This case, and the subsequent settlement, strongly signal that NFTs may be subject to securities laws enforcement.
DraftKings' exit from the NFT market could have implications for the wider NFT industry, given the company's prominent position in the sports gambling sector. Mainstream brands, including DraftKings, have reduced their activity in the NFT space amid industry changes.
One of the OG players in the NFT space that has adapted to changes during the crypto winter of the past two years is Yuga Labs.
In a bid to mitigate losses, DraftKings is offering buyouts to players of its fantasy sports game Rainmakers. NFT collectors, however, will be allowed to access and transfer their assets. It's worth noting that DraftKings joined the NFT market in 2021, with the view that in ten years, the NFT business could become gigantic.
The legal challenges faced by DraftKings could potentially set a precedent for other companies operating in the NFT space, particularly those offering sports-related NFTs. The $10 million settlement final approval underscores how legal frameworks traditionally applied to securities are being invoked in crypto asset disputes, illustrating heightened SEC scrutiny of these emerging financial products.
In summary, the DraftKings NFT class action lawsuit and its resolution are a clear sign of increased SEC and regulatory scrutiny on crypto assets, particularly in how they may be regulated as securities when profit expectations and control by issuers are present. This development could shape the future of the NFT industry as we know it.
%20ends%20NFT%20(Non-Fungible%20Token)%20operations%20due%20to%20ongoing%20class%20action%20lawsuit){kind=link}