NFLPA Alleges DraftKings Owes it $65 Million in NFT Case
The NFL Players Association (NFLPA), the labor union that represents the league's athletes, asserted in recently released court filings that DraftKings (NASDAQ: DKNG) owes them almost $65 million as a result of the sportsbook operator's nonfungible tokens (NFTs) marketplace being shut down.
Although the court sealed relevant records when the NFLPA's lawsuit against the gaming firm was announced last week, there were rumors that DraftKings might owe the union $32.39 million because that sum was included in the NFLPA's 2023 annual report's accounts receivable section. OneTeam Partners, the marketing firm that mediated the original agreement between DraftKings and the NFLPA, was cited by the union as the source of that amount.
The players' union's legal counsel does not explicitly mention that the organization owes $65 million in the paper. Instead, the plaintiffs' lawyers emphasize that five DraftKings executives, including co-founders Paul Liberman, Matt Kalish, and Jason Robins (who is currently the company's CEO), have been paid since 2021, and that the sum owed to the union is four times the sum paid to the five executives.
"All told, the compensation of just these five aforementioned officers since 2021 is approximately quadruple of what DraftKings owes to the NFLPA licensors,” according to the legal filing.
The NFLPA also cited former CFO Jason Park and Chief Legal Officer R. Stanton Dodge as executives in addition to Kalish, Liberman, and Robins. Sales of the company's common stock provided the majority of their remuneration in each of the five cases over the previous few years, a trend that persists to this day.
DraftKings/NFLPA Rift Could Be Affected by an NFT Class Action
The operator of the online sportsbook declared in late July that the DraftKings Marketplace will be shut down and that the Reignmakers fantasy sports game, which was based on the NFTs offered in the marketplace, would be discontinued.The decision is thought to have been made in response to US District Judge Denise Casper's decision last month, which allowed a class-action lawsuit against the gambling firm that was based on problems with the NFT marketplace to proceed.
Lead plaintiff Justin Dufoe filed the lawsuit in March 2023 in the US District Court in Boston, alleging he lost $14K when trading in NFTs on the DraftKings Marketplace. The labor organization disputes the NFLPA's claim that the gambling firm is trying to exploit Casper's decision as fulfillment of a termination clause in its contract with the union.
The NFLPA ruled that the gaming firm knew the NFT pact wasn't a risk-free agreement and that "buyer's remorse" isn't a good basis to terminate a contract.
“At the end of the day, and despite DraftKings’ best efforts to muddy the waters, this case is extraordinarily simple. DraftKings’ inability to profitably commercialize the intellectual property it licensed does not excuse performance, and DraftKings must pay what is due,” according to the union’s legal document. Counsel for the players union added the group renegotiated terms of the pact with DraftKings although it was under no legal obligation to do that.
Reignmakers Started Hot, Pinched by NFT Collapse
At the height of the NFT mania in 2021, DraftKings introduced its Reignmakers and NFT marketplace. Participants in the Reignmakers fantasy game, which operated similarly to standard fantasy sports, would buy digital goods licensed by the NFLPA.
The purchase served as a kind of admission fee, and the strategy was successful for a while. However, after the 2022 "cryptocurrency winter," NFT prices fell sharply in early 2023, deterring players from paying a premium for Reignmakers. The NFLPA said that DraftKings had concerns regarding the licensing agreement's economics and that the gaming business failed to make a relevant payment to the union in April 2023 when NFT pricing faltered and market liquidity dried up. In the court document, the amount of that payment was redacted.
The union's attorneys assert that DraftKings' decision to exit the NFT business has no impact on the company's financial responsibilities to the NFLPA and that the union has not received any payments from the gaming company since the beginning of this month.
In addition to compensating the union for court expenses and legal fees, the NFLPA is requesting that the US Federal Court in the Southern District of New York order DraftKings to pay all outstanding amounts owed under the modified licensing agreement, which are redacted in the document.
