Judge Advance DraftKings Case, Digital Cards as Securities

A
U.S.
judge
sitting
in
a
Massachusetts
court
has
refused
to
dismiss
a
class
action
suit
against
DraftKings
over
whether
its
online
trading
cards
are
securities,
allowing
the
case
to
move
forward. 

Buyers
of
DraftKings
NFTs
initiated
the
dispute
with
the
claim
that
such
contracts
are
investment
contracts
and
should
be
regulated
as
securities.

Application
of
Howey
Test

The
court
found
that
digital
cards
purchased
through
the
Marketplace
were
securities
under
the
Howey
test.
In
general,
there’s
a
trend
in
rigorous
inquiry
on
this
issue
and
tightening
attempts. 

The
plaintiffs
argue
that
investment
in
DraftKings’
digital
trading
cards
was
with
an
expectation
of
profits,
predominantly
from
the
efforts
of
DraftKings,
furthering
a
joint
enterprise,
hence
meeting
the
test
requirement
for
Howey.

Legal
Review 

Additionally,
this
case
sets
a
precedent
for
how
future
U.S.
law
will
view
other
digital
assets.
The
reason
behind
this
is
that
NFTs
blur
the
lines
between
digital
collectibles
and
investment
assets;
this
case
could
very
well
reshape
the
regulatory
landscape
across
the
entire
industry.

The
case
shows
further
legal
challenges
to
the
companies
acting
in
the
framework
of
digital
assets.
DraftKings’
position,
claiming
that
its
NFTs
are
to
be
incorporated
into
the
gameplay
rather
than
merely
serve
as
an
investment
tool,
does
quite
well
with
the
whole
complexity
of
modern
digital
assets. 

As
this
case
proceeds
further,
the
business
repercussions
are
various
coming
at
a
time
of 
stringent
oversight
by
the
regulator
and
the
courts
in
defining
the
legal
status
of
NFTs
and
other
digital
assets.

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