DraftKings folds NFT marketplace plans - for now

DraftKings has been on a bit of a mergers-and-acquisition carousal, making a play for both Simplebet and Jackpocket in multi-million deals. Yet, the company may need to wind down some of its ventures, not because of facing a cash crunch, but because it is navigating perilous regulatory waters.

DraftKings confirms shut down of NFT marketplace

The venture in question has to do with the company’s ambitious NFT marketplace launched in August 2021, used to sell digital collectibles based on sports merch, athlete likeness and imagery, and more.

However, DraftKings has been hard-pressed to prove in court that its non-fungible tokens were not unregistered securities – a popular refrain that regulators have used to single out NFTs and cryptocurrencies in the United States.

For now, DraftKings seems to have bucked under the court’s decision, informing consumers in internal communications that:

"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."

However, DraftKings does not want its consumers to be on the hook for the money they have spent on their NFTs. Therefore, DraftKings will be happily buying up the collectables and offer cash payments back to users.

Certain conditions ought to be met, however, DraftKings cautions, essentially putting a cap on how much it can spend to reimburse consumers. The company has outlined some of the factors that would determine the price of an NFT, such as the size and quality of the digital game piece collection, and so on.

Lack of regulatory clarity on NFTs harries businesses and investors

DraftKings has worked hard to make the DraftKings Marketplace into more than just a whim or a fad. The company ploughed extensive efforts to raise the profile of the NBA Top Shot NFTs which proved quite popular with audiences.

The developer of the tokens, Dapper Labs, was also attacked in court and it chose to settle, paying $4m. The biggest issue for developers and businesses though has not been the regulatory framework itself, but rather the lack of clarity.

The US Securities and Exchange Commission under whose purview much of this emerging class of "assets" has fallen has been loath to elaborate on their status, dithering about a solution over the past years, to the point where lawsuits have been launched against the regulator for its obstinate refusal to issue guidelines.

DraftKings was successfully leveraging popular athletes’ NFTs, including those backed by Tom Brady, a present-day NFL player of an already legendary status.

Image credit: DraftKings