DraftKings has reached a $10 million dollar settlement in a class-action lawsuit over its Reignmakers NFTs. Last month, a U.S. District Judge ruled that NFTs were indeed securities under the current law. Because of this, the settlement is an incredible win. This decision marks a significant moment in the ongoing debate over the regulatory status of NFTs and other digital assets. The class action lawsuit, originally filed in March 2023, includes more than 175,000 investors who bought or sold DraftKings NFTs through the DK Marketplace.

The class-action settlement was given preliminary approval on February 28, 2025. U.S. residents who purchased, sold, or held a DraftKings NFT through DK Marketplace during the defined class period may be eligible to claim part of the settlement.

The Lawsuit and the Howey Test

The class-action lawsuit that became a national issue was first filed in March 2023 by lead plaintiff Justin Dufoe. In short, Dufoe claimed that DraftKings’ Reignmakers NFTs were investment contracts and therefore securities under U.S. securities law. His argument was based on the assumption that these NFTs, sold through the DK Marketplace, were securities. He made this argument based on the factors set forth by the Howey Test.

The Howey Test, a standard used to determine whether certain transactions qualify as investment contracts and therefore be considered securities, played a crucial role in the court's decision. It looks at whether an investment includes the expectation of profit based on the work of others.

In July 2024, U.S. District Judge Denise Casper denied DraftKings’ motion to dismiss the case, allowing the case to proceed. In applying the Howey Test, Judge Casper agreed that DraftKings’ NFTs could reasonably be treated as securities. With the bright line of class certification in hand, this ruling provided the groundwork for settlement discussions.

Details of the Settlement

DraftKings’ $10 million payout represents a pivotal moment in the evolving legal landscape surrounding NFTs and digital assets. The settlement will provide cash relief to people who used the DraftKings NFT marketplace.

We favor the settlement amount of $10 million, which will be divided between class members who meet the eligibility criteria. These U.S. residents nevertheless engaged in the affirmative buying, selling, or holding of a DraftKings NFT. They even bought or downloaded from the DK Marketplace in the specified class period.

Justin Dufoe, in his capacity as lead plaintiff on behalf of the class, will receive a $50,000 service award. This honor is a testament to his talent, diligence and commitment in pursuing the litigation. Once the settlement is finalized, we’ll provide a blueprint of how best to spend the settlement’s funds. We’ll walk through the claims process for eligible class members to file.

Implications and Future Outlook

The DraftKings case highlights the increasing scrutiny that NFTs and other digital assets are facing from regulators and the legal system. Using the Howey Test to NFTs raises important issues about the way we should categorize assets. More importantly, it underscores the case for regulatory accountability.

The lawsuit centered on DraftKings' Reignmakers NFTs. The plaintiffs’ lawsuit argued that DraftKings’ Reignmakers NFTs were actually considered investment contracts governed by U.S. securities law.

The future of this case could set a significant precedent that may impact the entire NFT space. It could result in more prudence from companies selling NFTs and increased regulatory attention to the sector. The legal status of NFTs remains a complex and evolving area, and further clarification from lawmakers and regulators is anticipated.