DraftKings Sportsbook ad at a Nashville Predators game (Brett Carlsen/Getty Images)

Weird Money

Were DraftKings NFTs actually unregistered securities?

The company’s legal woes bode poorly for NFT marketplaces.

8/1/24 4:20PM

On July 30, sports betting platform DraftKings announced that it was shutting down its NFT Marketplace as well as “Reignmakers,” its first NFT-based fantasy football game, due to “recent legal developments.” Though the company didn't specify which legal developments led to this decision, on July 2, a judge denied DraftKings' motion to dismiss a class action lawsuit alleging that DraftKings’ NFTs were actually unregistered securities.

In March 2023, after losing more than $14,000 on DraftKings NFTs, Justin Dufoe sued DraftKings for violating federal securities laws, claiming that DraftKings was issuing unregistered securities and operating an unregistered securities exchange. To quote the court filing:

Plaintiff acquired DraftKings NFTs during the Class Period and was damaged by the federal securities law violations alleged herein. Plaintiff purchased $72,263.21 of DraftKings NFTs on DK Marketplace, using United States Dollars to make the purchase, as indicated on Exhibit 1. Plaintiff sold certain NFTs at a loss on the DraftKings’ secondary market exchange, also as indicated on Exhibit 1. Plaintiff currently holds certain NFTs, which have declined in value. Plaintiff’s current losses exceed $14,000…

Due to the Defendants’ issuance, promotion, and sale of unregistered securities, Plaintiff and the Class—many of whom are retail investors who lack the technical and financial sophistication necessary to evaluate the risks associated with their investment in DraftKings NFTs and were denied the information that would have been contained in the materials required for the registration of the DraftKings NFTs—have suffered significant damages.

The TL;DR: Dufoe lost $14,000 on DraftKings NFTs and sued the company for damages, claiming that he was unable to appropriately “evaluate the risks” associated with said NFTs because, by issuing unregistered securities, DraftKings was able to withhold pertinent information. (I, personally, don’t think that one should be too surprised that they lost money buying fantasy sports NFTs in 2022, but I digress.)

On July 2nd, a judge agreed with Dufoe, allowing the lawsuit to proceed and denying DraftKings’ motion to dismiss the case, leading to the company shutting down its NFT marketplace. DraftKings is offering cash payments to compensate current Reignmakers holders.

How did DraftKings lose its motion to dismiss? Since the 1940s, courts have used “the Howey test” to determine whether or an instrument is a security, with investment contracts defined as the following: “a contract transaction or scheme whereby a person invests [their] money in a common enterprise and is led to expect profits solely from the efforts of the promoter or third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by normal interests in the physical assets employed in the enterprise.”

Let’s break the Howey test into four parts, then check the judge’s explanation in the July 2nd filing. Howey test criteria:

An investment of money
In a common enterprise
With the expectation of profit
To be derived from the efforts of others

Obviously, NFT projects involve individuals “investing their money” (because they cost money to purchase, after all), so point one is accounted for. On point two, the judge concluded that companies reinvesting money raised from their NFT offerings into their businesses qualify as “common enterprise”:

The common enterprise requirement may be satisfied by "horizontal commonality," in other words, "the pooling of assets from multiple investors in such a manner that all share in the profits and risks of the enterprise…

Here, Dufoe has sufficiently alleged the pooling of assets requirement, because the revenue generated by the sale of NFTs was reinvested into DraftKings's business, including through the promotion of the Marketplace.

For point 3, while the company argued that DraftKings never represented to consumers that NFTs would appreciate in value, several instances, including a DraftKings podcast with Gary Vaynerchuk and DraftKings’ president Matt Kalish, proved the opposite:

Defendants used a Twitter account to share news on "the biggest risers and fallers" within the NFT Marketplace. Such marketing had the potential to encourage its audience to view DraftKings NFTs as an investment opportunity…

Statements made on the podcast hosted by Kalish and Vaynerchuk, encouraged investors to view the NFTs as profitable (alleging that DraftKings published a podcasts containing statements from entrepreneurs regarding NFTs as an investment, including "this will be the summer of people picking up some stuff on fire sale that twenty years from now was like `oh my god, how much did you pay in August 2022'")

Moreover, Plaintiffs allege that the public viewed DraftKings NFTs as an investment and purchased NFTs with such intent.

And on point four, the judge ruled that NFTs prices are largely dependent on the company’s ability to generate and maintain interest in its marketplace (i.e. the profit is derived from the efforts of others):

Although the NFTs are non-fungible assets whose prices do not uniformly rise and fall, it is still plausible for this Court to infer, and for Plaintiffs to expect, that if DraftKings drummed up additional demand for its NFTs while limiting the supply, that the value of most NFTs in the ecosystem would rise. Inversely, if DraftKings failed to maintain scarcity or generate sufficient interest in the Marketplace, the price of the NFTs would fall.

This was the second major sports-related NFT lawsuit in the last two months, with NBA Top Shot maker Dapper Labs agreeing to pay a $4 million settlement to plaintiffs in exchange for them no longer claiming their NFTs are securities, and it sets a dangerous precedent for companies that launched their own NFT marketplaces.

Let’s be real: NFTs were always objects for speculation, and the companies issuing the NFTs realized they could make money by creating marketplaces for those objects of speculation and charging fees on everything. Everyone was fine with this arrangement as long as prices were going up, prices stopped going up, and people got mad that they lost money. If you launched an NFT marketplace and ever alluded to a user’s ability to profit from your NFTs, any disgruntled user can make a strong case in a class action securities lawsuit.

I would guess that we’ll see more cases like this emerge as NFT bagholders realize that class actions lawsuits could help them recoup some of their losses.

Tom Jones6/24/26

Prime Day is here again and Amazon’s subscription service has never been more popular

Well, it’s that time of year again: many have made their wish lists, people are scraping together the money they’ve saved to pick out a perfect gift, some are presumably leaving out refreshments for the weary delivery drivers and, more and more, drones.

It’s Amazon Prime Day — meaning that it’s the second day of the four-day promotional event that Amazon still calls Prime Day — of course, and it’s even come early this year, with the company bringing the period into late June from July, when it’s been traditionally held for the last five years.

The Prime Age

Alongside the eyes and endless clicks that the arbitrary stream of listicles on “The Best Prime Day Deals” that almost every media outlet pours into, Amazon will also be cheering the fact that there’s now more Prime users than ever before to devour the retailer and its sellers’ sometimes-contested “discounts.” Indeed, according to the latest annual estimates from Consumer Intelligence Research Partners (CIRP), there were just over 200 million American shoppers using Amazon’s massive subscription service at the end of 2025.

Max Knoblauch6/15/26

Electronic Arts launches a platform to put more ads in its games

Video game publishing giant EA launched a new platform on Monday designed to make the process of selling immersive ad space in its popular games easier.

The company says the platform, called EA Advertising, allows brands to “integrate directly into gameplay through dynamic, real-time placements, from stadium signage to custom in-game content.”

More so than other studios, EA has incorporated advertising into its most popular titles. As Kotaku points out, the company’s ad efforts stretch as far back as 2006. Several of its sports franchises already feature partnerships with brands like Visa, Lowe’s, Red Bull, and PepsiCo.

In-game advertising hasn’t exactly been embraced by fans, but industry experts expect it to ramp up as companies seek more revenue to offset higher games budgets and surging memory costs. EA rival Take-Two has taken a different approach, with CEO Strauss Zelnick recently saying the company was “not at risk of doing brand partnerships” in the forthcoming “Grand Theft Auto VI,” and that ads in full-price games seems “unfair.”

The $55 billion deal to take EA private, led by Saudi Arabia’s Public Investment Fund, is set to close at the end of this month. Being the largest leveraged buyout in history, EA will likely look for more ways to boost revenue to cover interest payments.

Electronic Arts Makes Push for Ad Dollars Tied to Sports

Millie Giles6/11/26

JM Smucker says it sold $1 billion worth of Uncrustables in FY2026

After years of booming sandwich sales, JM Smucker has finally earned a billion-dollar crust.

On Tuesday, the company reported results for fiscal year 2026, highlighting better-than-expected profits driven by higher prices for coffee and sweet baked goods. However, at another point on the earnings call, CEO Mark Smucker pointed to one particularly jammy figure: in line with previous forecasts, the company sold $1 billion worth of its (almost always) crustless sandwiches, Uncrustables, in the last year alone.

Max Knoblauch6/8/26

Paramount reportedly offers concessions to resolve multistate antitrust investigation

Paramount has reportedly offered up some concessions in an effort to prevent an antitrust lawsuit by California and about 10 other states, according to Bloomberg reporting on Monday.

Reuters first reported on the potential suit from a group of unnamed states last week, which could throw a wrench in Paramount’s plans to buy rival Warner Bros. Discovery in a Hollywood megamerger.

The list of concessions is unknown, though Bloomberg previously reported that Paramount is open to divesting some of its kids TV assets to appease EU regulators.

Late last month, reports said US regulators appeared likely to approve the $110 billion merger, following a meeting between Paramount CEO David Ellison and DOJ antitrust staffers.

Paramount Offers Concessions to Head Off State Antitrust Lawsuit

The list of concessions is unknown, though Bloomberg previously reported that Paramount is open to divesting some of its kids TV assets to appease EU regulators.

Late last month, reports said US regulators appeared likely to approve the $110 billion merger, following a meeting between Paramount CEO David Ellison and DOJ antitrust staffers.

$98B ⛽

Max Knoblauch6/8/26

The IATA released its latest financial outlook for the airline industry over the weekend, forecasting a $98 billion jump in the sector’s collective fuel bill. The world’s largest trade group representing airlines expects the oil spike to halve profits by 49% from last year to $23 billion.

The group also expects profit margins to halve year over year, falling from 2025’s 4.2% to 2%. Still, revenue is expected to climb to $1.17 trillion from $1.07 trillion.

A surge in the cost of jet fuel has rocked US and global airlines this year, leading Delta Air Lines, United Airlines, American Airlines, Southwest Airlines, JetBlue, and others to raise fares and ancillary charges like bag fees. Low-cost carriers, which operate on smaller margins, have been squeezed the hardest, resulting in Spirit’s shutdown.

“It’s a tough year for all airlines, especially those whose balance sheets had not yet recovered from COVID. And, of course, for those operating in the Gulf,” said IATA Director General Willie Walsh, who added that demand is holding up and about half of passengers expect to spend more on travel this year. “That bodes well for a strong northern summer peak season. The big unknown is how long travelers and shippers can tolerate the higher costs of connectivity.”