NFL Players Union Slaps NFT Startup with $65M Lawsuit
The dispute arose after DraftKings shut down its NFT-based fantasy sports platform, Reignmakers
August 29, 2024 08:03 AM
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TL;DR The NFL Players Association has filed a lawsuit against DraftKings, seeking $65 million in damages. The lawsuit challenges DraftKings' breach of contract and unpaid dues.
The National Football League Players Association (NFLPA) has initiated legal proceedings against DraftKings Inc. The NFLPA seeks approximately $65 million in damages following the abrupt shutdown of DraftKings' NFT-based fantasy sports platform, Reignmakers.
The lawsuit, filed in the US District Court for the Southern District of New York, alleges that DraftKings breached its licensing agreement with the NFLPA.
The agreement permitted DraftKings to use the likenesses of NFL players in Reignmakers. On this platform, users could purchase, trade, and use non-fungible tokens (NFTs) linked to professional athletes in fantasy sports contests.
DraftKings' Justification
DraftKings closed Reignmakers in July, citing "recent legal developments" as the reason for its decision.
This action followed a ruling in Massachusetts federal court that denied DraftKings' motion to dismiss a class-action lawsuit. The lawsuit alleged that the NFTs sold on the platform constituted unregistered securities.
The NFLPA argues that the $65 million owed is based on minimum guarantees specified in the contract, which DraftKings allegedly failed to meet.
According to the complaint, the company has not made any payments since August 1, 2024, despite previous obligations.
The NFLPA claims that DraftKings' decision to halt payments is driven by the downturn in the NFT market, which has significantly cooled since its peak.
DraftKings justified its decision by referencing a clause in the contract. The clause allows termination if a "government, regulatory, or adjudicatory body" determines that the NFTs are securities.
However, the NFLPA contends that the court ruling in Massachusetts did not definitively categorize the NFTs as securities; therefore, the contract remains valid.
Financial Implications
The lawsuit also highlights the substantial compensation received by DraftKings executives. Over $261 million has been collectively received by executives since 2021.
The NFLPA argues that this figure is roughly 4x what the company owes under the licensing agreement.
The case has been assigned to US District Judge Analisa Torres. Judge Torres has experience with cases involving digital assets.
Her rulings could have broader implications for the legal treatment of NFTs and other digital collectibles, still fraught with legal ambiguity.
