DraftKings, a leading online betting service in the U.S., has announced the closure of its non-fungible token (NFT) marketplace after three years of operation. This decision also affects Reignmakers, a fantasy sports game based on NFTs, which will be discontinued immediately due to recent legal challenges.

Legal Complications

The company cited legal complications as the primary reason for shutting down the marketplace. Although specific details about these issues were not disclosed, DraftKings stated that this move is necessary to align with current legal expectations and protect its business and stakeholders. The closure comes in the wake of a federal class action lawsuit alleging that DraftKings’ NFTs function as unregistered securities.

The lawsuit against DraftKings reflects a broader regulatory scrutiny across the NFT sector. 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 illegal activities. These factors have contributed to a significant decline in NFT popularity, with sales dropping by 63% in 2023.

Industry-Wide Trend

DraftKings is not alone in exiting the NFT business. GameStop also recently withdrew from the NFT market, citing regulatory uncertainties. These decisions highlight the volatile nature of the NFT market and the urgent need for clear regulatory frameworks to address its challenges.

DraftKings has assured customers that they can still access their digital game pieces and NFTs through the My Portfolio page on its website. The company is also offering a cash payment option for customers willing to relinquish their Reignmakers game pieces, though specific terms and conditions apply.

Focus on Core Business

Despite the NFT marketplace closure, DraftKings is expanding its core business areas. The company recently announced plans to launch its online sportsbook in Washington D.C., pending regulatory approvals. This expansion will mark Washington D.C. as the 29th North American jurisdiction where DraftKings operates. The company continues to grow in the sports betting sector, accounting for 30% of the gross gaming revenue in the U.S. in the first quarter of 2024, up from 25% the previous year.

The closure of DraftKings’ NFT marketplace underscores the increasing regulatory pressures and challenges within the digital asset industry. As the company shifts focus back to its core offerings, it remains committed to navigating the evolving legal landscape to ensure sustainable growth and compliance.