NFLPA Sues DraftKings Over NFT Shutdown

The NFL Players Association (NFLPA) filed a lawsuit on Wednesday, August 20, against DraftKings and its parent company, DK Crown Holdings, Inc., in the U.S. District Court for the Southern District of New York. The lawsuit arises from DraftKings' decision in July to shut down its Reignmaker NFT platform. The NFLPA is seeking damages for what it describes as an "anticipated breach of contract," alleging that it provided DraftKings with intellectual property licensing rights for NFL players. This agreement enabled consumers to purchase NFTs for use in fantasy sports contests.

Most of the lawsuit documents remain sealed, and there is no indication of when the seal may be lifted. The NFLPA’s attorney has requested a court order to file redacted documents. David Greenspan, a litigator specializing in antitrust, sports, and complex commercial cases with Winston & Strawn LLP in New York City, is representing the NFLPA. Greenspan has a history of working with athletes and has won several antitrust class-action lawsuits against the NCAA, particularly those involving the NCAA’s “pay for play” model and NIL issues.

DraftKings, a Boston-based sports betting partner of the NFL, launched an NFT marketplace in August 2021, promoting it as an opportunity for collectors. Consumers could purchase NFTs, transfer them to a digital wallet, or sell them on DraftKings' secondary NFT marketplace. The NFTs were created by Autograph. However, DraftKings was not alone in the NFT space, and interest in these products quickly waned. Last month, DraftKings abruptly shut down its NFT business on July 30, citing legal issues..

In a statement at the time, DraftKings said:

“After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments. This decision was not made lightly, and we believe it is the right course of action.”

There is also an ongoing lawsuit in Massachusetts concerning the NFT business, focusing on whether NFTs should be considered securities and if their sale violates SEC regulations.