NFLPA sues DraftKings for $65 million over sudden shutdown of NFT platform Reignmakers

The National Football League Players Association (NFLPA) is suing DraftKings Inc., seeking $65 million in damages after the sudden closure of its 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 by failing to make payments owed under the contract.

NFLPA contract dispute with DraftKings

The NFLPA’s licensing agreement with DraftKings allowed the use of NFL players' likenesses in Reignmakers. The platform enabled users to buy, trade, and use NFTs linked to professional athletes in fantasy sports contests.

However, DraftKings shut down Reignmakers in July, citing "recent legal developments" after a Massachusetts court ruling denied a motion to dismiss a class-action lawsuit. The suit claimed that the NFTs on Reignmakers were unregistered securities.

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NFLPA believes NFT market downturn has led to DraftKings' reluctance to continue payments

The NFLPA contends that the $65 million sought reflects minimum guarantees specified in the contract, which DraftKings allegedly failed to honour. The association claims the company has not made payments since August 1, 2024, despite previous obligations.

The NFLPA attributes DraftKings’ decision to the broader decline in the NFT market, arguing that the downturn led to the company's reluctance to continue payments.

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The lawsuit also highlights DraftKings' executive compensation, which exceeded $261 million since 2021. The NFLPA notes that this figure is significantly higher than the amount owed under the licensing agreement, suggesting a disconnect between the company's financial decisions and its contractual obligations.

DraftKings believes it is reasonable to terminate the contract

DraftKings justifies its decision by pointing to a contract clause allowing termination if a legal or regulatory body determines the NFTs are securities.

However, the NFLPA argues that the Massachusetts ruling did not definitively classify the NFTs as securities, maintaining that the contract should remain valid.

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This case may have an impact on the NFT market

The case, now under US District Judge Analisa Torres, could have significant implications for the legal treatment of NFTs and other digital collectibles, a domain still mired in legal uncertainty.