DraftKings faces potential NFT class action lawsuit

DraftKings faces potential NFT class action lawsuit

A class action has been brought against sports betting operator DraftKings for allegedly selling NFTs (non-fungible tokens) as unregistered securities.

the trial, Justin Dufoe v. DraftKings, Inc., seems to stem from the significant losses people have accumulated over the tanking of the NFT market. In January, Fanatics announced that they sold their 60% stake in NFT Candy Digital, to Galaxy Digital.

All NFTs, whether sports memorabilia, art, music or videos, have a unique digital identifier that verifies authenticity and ownership. Many had hoped that these unique digital symbols could bring substantial profits on the secondary market, similar to physical works of art.

Customers can browse DraftKings Marketplace for one-of-a-kind NFTs, which is where this lawsuit originates.

NFT value loss leads to DraftKings lawsuit

Filed on March 9 in United States District Court in Boston the complaint reads:

“Respondents had actual knowledge of facts indicating that the NFTs they promoted and sold were ‘securities’ under federal and state securities laws and further that they had not registered the NFTs as securities.

Defendants reaped, or will reap, hundreds of millions of dollars in profits from their unregistered securities sales.”

In accordance Massachusetts Lawyers Weekly, Dufoe bought DraftKings’ NFTs in an IPO. The plaintiff claims that he expected to “realize profits” by trading his NFTs.

The complaint states:

“Profits would be realized when Plaintiffs and the class would sell their NFTs on the secondary market platform that DraftKings exclusively owned and operated, with DraftKings receiving exchange-like fees and commissions from purchases and sales on its secondary market platform.

“Therefore, Plaintiff and the Class were entirely dependent on the managerial efforts of DraftKings, both when they originally purchased the NFTs and when they later sold them on DraftKings’ controlled secondary market.”

Dufoe, a resident of Illinois, claims he has experienced loss upwards of $14,000 due to the decline in the value of the NFTs he bought.

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The proposed class action includes all investors who purchased DraftKing’s NFTs between 11 August 2021 and the present.

Fantasy sports also face questions

But this isn’t the only lawsuit DraftKings has to deal with.

Another matter, Simpson G. Turley v. DraftKings, Inc.applies to DraftKings’ daily fantasy sports section.

The specific case is the January 2, 2023 game between the Buffalo Bills and the Cincinnati Bengals. During the contest, Bills safety Damar Hamlin collapsed on the field. In the end, the game was postponed with less than six minutes left in the first quarter. In the end, the NFL chose to cancel the game entirely.

The complaint reads:

“On January 3, 2023, DraftKings began contacting its DFS participants, including Plaintiff Turley and the class members, to explain that DraftKings had decided to cancel and refund entries for certain NFL fantasy football contests.

Notably, however, DraftKings did not cancel or refund entries in other NFL fantasy football contests, choosing instead to pay out those contests based on “current points earned,” which included points earned from the Buffalo Bills-Cincinnati Bengals game.

At the heart of Turley’s complaint is that DraftKings paid specific DFS events using the scores from the Bills-Bengals game, but not others.

“DraftKings erroneously paid out certain NFL DFS contests while refusing to pay out other contests – DraftKings arbitrarily chose to use the statistics from the suspended Buffalo Bills-Cincinnati Bengals game (which played up to 5:58 left in the first quarter ) to certain contests and offer payouts to customers who lead in those contests, while refusing to use the same statistics from the game for other contests and refusing to offer the same payouts to customers who lead in those contests.”

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