U.S. Judge Sets Stage for NFT Securities Trial as DraftKings Lawsuit Moves Forward
A Massachusetts judge has rejected DraftKings' request to dismiss a class action lawsuit regarding its non-fungible tokens (NFTs). The lawsuit, initiated by buyer Justin Dufoe in March 2023, argues that the NFTs are investment contracts. The court ruled that DraftKings' NFTs could be classified as securities under the Howey test, as they involve an investment of money, shared risks and profits, and a reasonable expectation of profit from DraftKings' efforts. The court also noted that the NFTs' values were dependent on the success of the DraftKings Marketplace. This follows a similar case where Dapper Labs paid $4 million to settle a class action suit. The court highlighted a key difference between Dapper Labs' NFTs and DraftKings' NFTs: Dapper Labs uses its own blockchain called Flow, which increases its risk of violating securities laws. A date for the continuation of the DraftKings lawsuit has not been set.
