In newly revealed court documents, the NFL Players Association (NFLPA) alleges that DraftKings (NASDAQ: DKNG) owes it around $65 million following the closure of the sportsbook’s nonfungible tokens (NFTs) marketplace.
When the NFLPA’s lawsuit against DraftKings surfaced last week, the related documents were sealed, but there was speculation that DraftKings could owe the union $32.39 million, as indicated in the accounts receivable section of the NFLPA’s 2023 annual report. This amount was associated with OneTeam Partners, the marketing agency that brokered the initial deal between DraftKings and the NFLPA.
The legal filing doesn’t explicitly state that the NFLPA is owed $65 million. Instead, the union’s attorneys point out that the total compensation for five key DraftKings executives, including co-founders Jason Robins (currently CEO), Matt Kalish, and Paul Liberman, is roughly four times what the company owes the union.
“In total, the compensation of these five executives since 2021 is about four times what DraftKings owes the NFLPA,” the legal document states.
Other executives mentioned in the filing include former CFO Jason Park and Chief Legal Officer R. Stanton Dodge. The majority of their compensation in recent years came from sales of the company’s common stock, a trend that continues.
NFT Class Action Could Impact DraftKings and NFLPA Dispute
In late July, DraftKings announced the closure of its NFT Marketplace and the halt of its Reignmakers fantasy sports game, which was based on NFTs sold through the marketplace. This decision is believed to be related to a ruling by US District Judge Denise Casper, who allowed a class action lawsuit against DraftKings over issues with the NFT marketplace to proceed.
This lawsuit, filed in March 2023 in Boston, centers around lead plaintiff Justin Dufoe, who claims he lost $14,000 trading NFTs on DraftKings Marketplace. The NFLPA argues that DraftKings is trying to use Judge Casper’s ruling as justification for ending its agreement with the union, a position the NFLPA disputes.
The union contends that DraftKings cannot use “buyer’s remorse” as a valid reason to terminate the contract, asserting that the gaming company was aware of the risks involved in the NFT deal.
“DraftKings’ inability to profitably commercialize the intellectual property it licensed does not excuse performance, and DraftKings must pay what is due,” the NFLPA states in its legal filing. The union also notes that it renegotiated the terms of the agreement with DraftKings, despite not being legally required to do so.
Reignmakers’ Rise and Fall Amid the NFT Market Crash
DraftKings launched its NFT marketplace and Reignmakers in 2021 during the peak of the NFT boom. Reignmakers participants would buy NFLPA-licensed digital collectibles for use in the fantasy game, which operated similarly to traditional fantasy sports.
While initially successful, the venture struggled as NFT prices plummeted during the “cryptocurrency winter” of 2022. By early 2023, the declining NFT market discouraged players from investing in Reignmakers. As the market dried up, DraftKings reportedly expressed concerns about the economics of the licensing deal and missed a payment to the NFLPA in April 2023, though the amount was redacted in court filings.
The NFLPA argues that DraftKings’ decision to exit the NFT business does not affect its financial obligations to the union. Since early August, the union claims it has received no payments from DraftKings.
The NFLPA is now asking the US Federal Court in the Southern District of New York to order DraftKings to pay all outstanding amounts owed under the amended licensing agreement and to cover the union’s court costs and legal fees.
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