The NFL Players Association (NFLPA), a union for NFL athletes, is suing fantasy sports and betting platform DraftKings for a suggested $65 million USD in unpaid licensing royalties tied to terminated Web3 fantasy game, Reignmakers.
Filed in the state of New York, the lawsuit does not explicitly state the amount owed, but suggests that the $261 million USD paid to five DraftKings executives since 2021 is “approximately quadruple” of what is owed to the NFLPA.
DraftKings terminated Reignmakers last month following a separate lawsuit in Massachusetts which alleges that Reignmakers NFTs were offered as unregistered securities – a case that has been judged will go to trial.
Could this lawsuit succeed?
In their lawsuit filed in the state of New York, the NFLPA accuses DraftKings of abandoning their deal because “the once white-hot market for NFTs has cooled down.”
“This case is extraordinarily simple,” declared the NFLPA. “DraftKings’ inability to profitably commercialize the intellectual property it licensed does not excuse performance, and DraftKings must pay what is due.”
The past few months has seen several high-profile lawsuits and investigations in the NFT industry, with many centred on whether NFTs should be classified as securities in the US.
In June, Dapper Labs reached a $4 million USD settlement with NBA Top Shot holders over a lawsuit alleging those NFTs to be securities.
As mentioned, Web3 fantasy sports title Reignmakers – which debuted on Polygon in March 2022 and accumulated $287 million USD in NFT sales over its lifetime – was terminated in July following a lawsuit in Massachusetts, with DraftKings offering to buy out NFT holders in cash.
Earlier this week, OpenSea CEO Devin Finzer confirmed that the company had received a Wells notice from the SEC, over allegations that the NFTs traded on its site were securities.
DraftKing’s legal troubles
DraftKings is no stranger to legal wranglings, having fought with multiple US states over the legality of their fantasy sports and sportsbook offerings over the past 10 years.
The company has defended the termination of Reignmakers over a clause in their contract with the NFLPA that suggests that the contract can be voided “if a government, regulatory or adjudicatory body ‘determines’ that the [NFTs] constitute ‘securities.'”
This lawsuit filed by NFLPA could have negative repercussions for their ongoing legal battle in Massaschusetts, which could determine that Reignmakers NFTs are unregistered securities, and is set to go to court.
This would mark the first time that officially-licensed sports NFTs are scrutinised in court to determine whether or not they should be classed as securities, as the lawsuit on Dapper Labs officially-licensed NBA NFT collection, NBA Top Shot, was settled out of court.
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