DraftKings, a prominent online betting service in the United States of America, has announced the closure of its non-fungible token (NFT) marketplace, only three years after its inception. This decision also affects Reignmakers, a fantasy sports game based on NFTs, which will be discontinued immediately due to recent legal developments.
The company did not go into much detail regarding the specific legal issues but confirmed that the marketplace’s closure was a necessary response to these challenges. DraftKings emphasized the difficulty of the decision, stating it as a strategic move to align with current legal expectations and protect its business and stakeholders.
The backdrop to this closure includes a federal class action lawsuit alleging that DraftKings’ NFTs function as unregistered securities. This lawsuit reflects broader regulatory scrutiny across the NFT sector, where concerns about copyright infringement, fraud, and the use of digital assets for money laundering are increasingly prevalent.
The U.S. Treasury Department recently highlighted the risks associated with NFTs, noting their vulnerability to theft and their use in various illegal activities. These factors have contributed to a significant decline in NFT popularity, with a 63% drop in sales noted in 2023, according to PYMNTS, a reliable global source for data, news and insights on the latest payment methods.
Other Companies Have Done the Same
DraftKings’s move parallels actions taken by other companies within the digital asset industry, such as GameStop, which also exited the NFT business citing regulatory uncertainties. These decisions underscore the volatile nature of the NFT market and the need for clear regulatory frameworks to address its numerous challenges.
DraftKings has assured customers that they can still access their digital game pieces and NFTs through the My Portfolio page on its website. Furthermore, the company is offering a cash payment option for customers willing to relinquish their Reignmakers game pieces, although specific terms and conditions apply.
While the NFT marketplace is closing, DraftKings announced it continues to expand its core business areas. The company recently unveiled its plans to launch its highly rated online sportsbook in Washington D.C., subject to regulatory approvals. This expansion would mark Washington D.C. as the 29th North American jurisdiction where DraftKings operates, illustrating the company’s ongoing growth in the sports betting sector in the United States of America. In the first quarter of 2024 DraftKings managed to close the gap towards FanDuel, the market leader, accounting for 30% of the gross gaming revenue in the U.S., up from 25% in the previous year.