Nfts
US judge denies motion to dismiss DraftKings NFT class action lawsuit
A U.S. judge in Massachusetts has denied a request by DraftKings to dismiss a class action lawsuit brought by buyers of its non-fungible tokens (NFTs).
The complaint alleges that the tokens are investment contracts, setting the stage for a future legal battle over whether NFTs are securities. DraftKings offers sports-themed NFTs on its marketplace via the Polygon blockchain.
Justin Dufoe, a buyer, first filed a lawsuit against DraftKings on behalf of other owners. March 2023claiming that these NFTs met the criteria of the Howey test.
In this recent decision, a court agreed that DraftKings’ NFTs involved an investment of money, pooled assets in a common enterprise with shared risks and rewards, and created a reasonable expectation of profit from DraftKings’ efforts, thus plausibly classifying them as securities under the Howey test.
It is plausible that the value of NFTs depends on the success of the DraftKings marketplace, the court concluded, noting that value moves in tandem with interest in that specific marketplace, an issue that has been addressed in prior cases examining NFTs.
All this comes after Dapper Labs gave its approval in June The US group had to pay $4 million to settle a similar class action. Fortune reported earlier that the SEC had already launched an investigation into Dapper Labs, but closed it in September 2023.
However, the difference between Dapper Labs’ NFTs and those offered by DraftKings is that Dapper uses its own proprietary blockchain called Flow, while DraftKings issues its tokens on Polygon.
A date for the DraftKings class action lawsuit to be continued has not yet been set.