Nfts
Judge advances DraftKings case, digital cards as securities
A U.S. judge in a Massachusetts court has declined to dismiss a class action lawsuit against DraftKings over whether its online trading cards are securities, allowing the case to move forward.
DraftKings NFT buyers launched the litigation by arguing that these contracts are investment contracts and should be regulated as securities.
Application of the Howey test
THE the court ruled Digital cards purchased through the Marketplace were securities under the Howey test. In general, there is a trend towards rigorous investigation of this issue and attempts at tightening it.
Plaintiffs argue that the investment in DraftKings’ digital trading cards was made in the expectation of realizing profits, primarily from DraftKings’ efforts, that would further a common enterprise, thereby meeting the Howey test requirement.
Legal review
Additionally, this case sets a precedent for how future U.S. legislation will view other digital assets. The reason is that NFTs blur the lines between digital collectibles and investment assets; this case could very well reshape the regulatory landscape for the entire industry.
This case highlights the new legal challenges facing companies operating in the digital asset space. DraftKings’ position that its NFTs should be integrated into gameplay rather than simply serving as an investment tool fits quite well into the complexity of modern digital assets.
As this case progresses, the commercial implications are diverse and come at a time of tight regulator and court scrutiny to define the legal status of NFTs and other digital assets.
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