Online betting service DraftKings said is closing down its three-year-old non-fungible token (NFT) marketplace.
The company announced Tuesday (July 30) it was shuttering the marketplace, along with Reignmakers, a fantasy sports game based around NFTs, due to “recent legal developments.”
“This decision was not made lightly, and we believe it is the right course of action,” DraftKings said in its announcement. “Due to this update, we have decided to offer all holders of Reignmakers digital game pieces the opportunity to relinquish those game pieces to DraftKings in exchange for a cash payment (subject to certain conditions).”
DraftKings says Reignmakers and the NFT marketplace will be discontinued effective immediately, customers can still access their Reignmakers digital game pieces and other NFTs through the My Portfolio page.
While the company did not specify the nature of the legal developments, a report Tuesday by Coindesk noted that DraftKings is the subject of a federal class action lawsuit claiming the company’s NFTs are unregistered securities.
NFTs first emerged during the cryptocurrency bull market of 2021, with advocates promoting them as a way for everyday customers to play a role in the digital currency market. Since then, they’ve plummeted in popularity, with sales of NFTs dropping by 63% in 2023.
Earlier this year, GameStop, which had introduced an NFT marketplace in the summer of 2022, decided to exit the non-fungible token business, citing the ongoing regulatory uncertainty around the larger cryptocurrency market.
Meanwhile, the U.S. Treasury Department released an assessment in May which found that NFTs are “highly susceptible” to theft and use in fraud and scams.
“Additionally, criminals use NFTs to launder proceeds from predicate crimes, often in combination with other techniques or transactions meant to obfuscate the illicit source of funds,” the assessment said. “Criminals can exploit vulnerabilities related to characteristics of NFTs, the assets or entitlements that they reference, and regulatory frameworks in the United States and abroad.”
The treasury found that cybersecurity vulnerabilities, challenges connected to copyright and trademark protections, and hype and fluctuating prices of NFTs can allow criminals to commit fraud and theft related to NFTs and their platforms.
Making matters worse, the treasury said, NFT companies and platforms lack internal controls to prevent threats to market integrity, sanctions evasion, terror financing and money laundering.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More