The class action suit from DraftKings buyers alleges that NFTs are investment contracts. Justin Dufoe, a buyer, first filed suit against DraftKings, on behalf of other owners in March 2023.

A U.S. Judge in Massachusetts has denied a move by DraftKings to dismiss a class action lawsuit. Plaintiff Justin DuFoe claims the DraftKings NFTs constitute as unregistered securities and that many of the investors who buy them “lack the technical and financial sophistication necessary to evaluate the risks associated with their investment.” 

DuFoe argues he and other consumers purchased DraftKings NFTs during its initial public offerings of them, with the expectation that the companys’ NFT platform would allow them to “realize profits.” 

“The profits would be realized when Plaintiffs and the Class would sell their NFTs on the secondary market platform that DraftKings solely owned and managed,” the DraftKings class action states. 

DuFoe claims he and others were ultimately “entirely dependent” on the managerial efforts of DraftKings both when they purchased the NFTs and later sold them on a secondary market controlled by the company. 

DraftKings “had actual knowledge of facts” indicating that the NFTs they promoted and sold were considered securities under federal and state securities laws, yet failed to register them as such, the DraftKings class action alleges. 

“Defendants reaped, or will reap, hundreds of millions of dollars in profits from their unregistered securities sales,” the DraftKings class action states.