In newly revealed court documents, the NFL Players Association (NFLPA), the labor union for the league’s players, asserted that DraftKings (NASDAQ: DKNG) owes nearly $65 million due to the recent closure of the sportsbook operator's nonfungible tokens (NFTs) marketplace.
When the NFLPA's lawsuit against the gaming firm was revealed last week, the court sealed related documents, but there was speculation that DraftKings might owe the union $32.39 million, as that figure appeared in the accounts receivable section of the NFLPA's 2023 annual report. The union specified that amount as linked to OneTeam Partners, the marketing agency that facilitated the original agreement between DraftKings and the NFLPA.
In the legal document, the players’ union’s counsel does not explicitly mention that the organization is owed $65 million. Instead, lawyers representing the plaintiffs emphasize the remuneration for five executives at DraftKings, including co-founders Jason Robins (currently the CEO), Matt Kalish, and Paul Liberman, starting from 2021, pointing out that the sum due to the union is four times the total paid to these 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.
Along with Kalish, Liberman, and Robins, the NFLPA also refers to former CFO Jason Park and Chief Legal Officer R. Stanton Dodge. In all five instances, most of their earnings over recent years came from selling the company’s common stock, a trend that persists today.
Class Action Regarding NFTs Might Impact DraftKings/NFLPA Dispute
In late July, the online betting platform revealed the shutdown of DraftKings Marketplace and the discontinuation of the Reignmakers fantasy sports game that relied on the NFTs sold in the marketplace. It is commonly thought that the choice was made due to US District Judge Denise Casper's ruling last month permitting a class-action lawsuit against the gaming firm related to problems with the NFT marketplace to proceed.
The lawsuit was initiated in March 2023 in the US District Court in Boston, with principal plaintiff Justin Dufoe alleging he incurred a $14K loss from trading NFTs on DraftKings Marketplace. The NFLPA claimed that the gaming firm is trying to use Casper’s ruling to satisfy a termination clause in its contract with the union, but the labor organization contests this.
The NFLPA stated that “buyer’s remorse” does not constitute a legitimate reason to terminate a contract and that the gaming firm was aware the NFT agreement wasn’t without risk.
“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 Began Strong, Affected by NFT Decline
DraftKings introduced its NFT marketplace and Reignmakers during the peak of the NFT boom in 2021. Reignmakers users would acquire digital collectibles licensed by the NFLPA to use in the fantasy game, which operated similarly to conventional fantasy sports.
The purchase served as a type of entry fee, and the strategy worked well for some time; however, after the “cryptocurrency winter” of 2022, NFT prices dropped sharply in early 2023, deterring players from spending money on Reignmakers. As NFT prices declined and market liquidity disappeared, the NFLPA reported that DraftKings voiced worries about the financial aspects of the licensing deal and that the gaming firm failed to make a related payment to the union in April 2023. The sum of that payment was concealed in the court document.
The union's representatives assert that DraftKings' choice to leave the NFT sector does not affect its financial responsibilities to the NFLPA and that since the beginning of this month, the union has not received any payments from the gaming firm.
The NFLPA is requesting that the US Federal Court in the Southern District of New York order DraftKings to pay all outstanding amounts, which are redacted in the document, owed under the revised licensing agreement, and to reimburse the union for legal fees and court expenses.