Draftkings Inc. has agreed to a $10 million settlement in response to a class action lawsuit claiming to sell state and federal securities laws that violated the sale of inappropriate tokens.
The lawsuit, launched in 2023, argued that Draftkings' NFTs should be registered as securities, and failure to do so constituted a legal violation.
The purpose of the proposed settlement is to indemnify individuals who have purchased, held or sold DraftKings from August 11, 2021 until a judgment is entered.
In support of approval of the settlement, Bloomberg said the plaintiff urged the court to be “fair, reasonable and appropriate” as a result of “energetic litigation and serious length of negotiations.”
How to classify NFTs
This legal challenge is part of a broader trend to scrutinize the classification of NFTs under the securities law.
In the relevant case, Dufoev, a federal judge in Massachusetts. DraftkingsInc. has determined that the plaintiffs have alleged that an inappropriate token in Draftkings is believed to be considered under Howey Test to determine what constitutes security.
The court said despite NFTS transactions independently and on existing blockchains, all transactions occur through markets controlled by drafting, thereby meeting certain standards of Howie Test.
These developments highlight the evolving legal environment surrounding NFTs and classifications based on securities laws.
Companies engaged in creating and selling NFTs are increasingly facing legal challenges that question whether these digital assets should be regulated as securities, prompting a reassessment of business practices and compliance strategies within the rapidly growing NFT market.
