DraftKings has announced the immediate shutdown of its non-fungible token (NFT) business, including its three-year-old NFT marketplace and the Reignmakers fantasy sports game, due to recent legal developments.

The company is currently facing a federal class action lawsuit claiming its NFTs are unregistered securities, which has raised serious legal concerns.

This decision follows a federal judge's ruling that allowed the class action lawsuit to proceed, classifying DraftKings NFTs as securities under the Securities Act and Exchange Act.

On July 2, 2023, the court found the claims made by the plaintiffs plausible, further complicating the legal landscape for DraftKings.

DraftKings communicated the closure decision to customers via email, emphasizing that it was made after careful consideration.

Despite the shutdown, NFT collectors will still have access to their assets and can transfer them.

The legal troubles began in March 2023 when a class action lawsuit was filed by customer Justin Dufoe, asserting that the NFTs met the criteria for investment contracts.

Additionally, DraftKings will allow holders of Reignmakers digital game pieces to exchange them for cash payments, subject to certain conditions.

This closure marks a significant shift in the intersection of sports culture and digital assets, which had previously seen high engagement and investment.

The NFT market has seen a dramatic decline, with sales dropping by 63% in 2023, and July 2023 recorded the lowest monthly sales volume for NFTs since November 2022.

DraftKings is not alone in this retreat from the NFT market; GameStop also exited earlier this year, citing ongoing regulatory uncertainty.

This is a developing story, and updates will be provided as more information becomes available.