DraftKings' NFT Gamble: Why the Reignmakers Program Failed

When DraftKings launched its Reignmakers NFT program in 2021, becoming the first online betting site to enter into this new market, it seemed like it would be a sure-fire winner. Non-fungible tokens were a hot item in the blockchain at the time, and DraftKings was featuring sporting legends Tom Brady and Wayne Gretzky in the launch of their line of NFTs.

But these NFTs didn’t catch fire. In fact, the whole episode is proving to be an unmitigated disaster, and one that sports betting and daily fantasy sports giant DraftKings is seeking to distance itself from as quickly as possible, even though reports suggest that the DraftKings Marketplace was creating 5% of the company’s total revenue.

Recently, DraftKings sent the following message to owners of NFTs purchased through the DraftKings Marketplace: “After careful consideration, DraftKings has decided to discontinue Reignmakers and our NFT Marketplace, effective immediately, due to recent legal developments. This decision was not made lightly, and we believe it is the right course of action.”

So where did it all go wrong? Let’s count the ways.

NFTs Were Overvalued

As is often the case, a new collectible entering the market often is overpriced. Demand for what is a limited supply creates artificial inflation in pricing. Correction is always inevitable.

Similar occurrences have come to be in such other areas of collectibles as sports trading cards and even stamps.

Everything was new about NFTs. They were the first digital trading cards to combine the element of being NFTs and thus, become part of the blockchain as digital currency, which was equally new to the world. The excitement they created was palpable.

Combine that with a built-in scarcity and people scooped up NFTs in rapid fashion. However, as is generally the case when it comes to collectibles, a few people got very rich and the majority ended up disappointed as the market corrected and they began to realize how much they’d overpaid to get their hands on these NFTs.

In 2022, NFTs generated $24.7 billion in trading revenue. That number dropped to $11.8 billion in 2023, a 52.3% correction. Overall value of NFTs has plummeted 90% since their introduction.

Legal Issues Compounding Problems

Beyond that factor, there are ongoing legal issues that are putting creators of NFTs such as DraftKings in jeopardy.

Are NFTs collectibles, or are they investments? This question may end up being determined by a court of law, with DraftKings as the defendants.

A class-action suit filed by Reignmakers customers against DraftKings is claiming that NFTs are in fact securities and therefore any purchase of them created an investment contract between the customer and DraftKings. One filing by DraftKings lawyers attempting to get the case dismissed has already failed.

If NFTs are in fact deemed to be securities, then they are required to be regulated by the U.S. Securities and Exchange Commission (SEC). Already, the SEC is on record suggesting that it is leaning toward viewing cryptocurrency assets as a security.

Unwilling to risk a court trial, Dapper Labs, creators of NBA Top Shot NFTs, settled a similar class-action suit for $4 million.

Are NFTs Dead?

Are all of these recent developments going to sound a death knell for NFTs? Probably not. The market is simply maturing, and NFTs are settling into their true value.

From a creator standpoint, NFTs are proving an invaluable way for companies to connect with customers and teams to bond with fanbases, by attaching unique, one-of-a-kind offers and experiences with the NFTs they distribute.

For collectors, one distinct advantage that NFTs hold over other similar collectibles is that since they exist in the Blockchain, there is a complete trail of ownership for each one. In an industry in which forgery is prevalent, this element alone assures that fraud is virtually impossible, so people acquiring an NFT can rest assured that it is the real deal.

As was the case with other collectibles over the years, this market correction is going to drive the speculators out of the game. Only the people who have a passion for collecting will remain, those who will treasure the item and not merely view it as a means to an end.

Best Known NFT Betting Marketplaces – 4 Alternatives to DraftKings NFT

Sorare – Fantasy football with digital player cards.
Rarible – Decentralized marketplace for various digital collectibles.
OpenSea – Large marketplace for diverse NFTs, including sports.
Top Shot by Dapper Labs – NBA highlights and moments as digital collectibles.