A collector in DraftKings’ now-defunct NFT marketplace has formally objected to the proposed $10m settlement in an ongoing securities class action, arguing that the compensation plan unfairly penalises some investors and misrepresents the nature of the harm.
In a three-page objection filed on 14 July, Massachusetts resident Brad Wyatt, a former top 10 holder of NFL Reignmaker NFTs, criticised the Plan of Allocation’s use of “Prize Receipts” as a deduction in calculating how much each class member will receive.
He claimed the approach distorts economic reality and undermines the settlement’s goal of compensating harmed investors.
Wyatt is the third class member to object to the settlement, following two earlier objections submitted in May.
The lawsuit, led by plaintiff Justin Dufoe, alleges that DraftKings violated federal securities law by offering NFTs as unregistered investment contracts.
DraftKings denies wrongdoing but agreed in April to a mediated settlement that includes a $10m fund for affected users, with up to $50,000 set aside for service awards and 25% for legal fees.
Wyatt’s objection centres on the formula used to determine “Individual Recognised Loss” (IR), which includes deductions for “Prize Receipts” (PR) from fantasy contests run separately on the DraftKings platform.
He said: “Including these Prize Receipts does not offset the economic harm suffered by class members as the proposed settlement regarding the purchase and sale of NFT securities on DraftKings Marketplace is unrelated to potential realised or unrealised prize receipts from playing in DraftKings Fantasy Sport skill-based contests”.
Top collector slams Reignmakers settlement formula
He further alleged that DraftKings inflated the fair market value of these prizes and that their inclusion in the formula results in “an unfair reduction of each class action participant’s NFT owners’ Individual Recognised Loss.”
Wyatt urged the court to adopt a revised formula that excludes Prize Receipts altogether, arguing that doing so would “better adhere to securities law principles and promote a more equitable distribution of damages”.
According to transaction data provided by DraftKings, Wyatt spent nearly $462,000 acquiring NFTs on the primary and secondary markets, but only received around $245,000 in resale and marketplace closure proceeds.
Prize Receipts accounted for an additional $252,000 in notional value, which Wyatt argues should not be treated as offsetting cash.
DraftKings shut down its NFT marketplace in March 2024, just weeks after the federal court declined to dismiss the securities lawsuit.
In the settlement memorandum, Dufoe’s lawyers noted that the timing “suggests an awareness of litigation risk” and argued the $10m fund represents “an outstanding result” given the uncertain legal landscape.
A final approval hearing has yet to be scheduled, and objections remain open until 21 days before that date.
The court will determine whether to approve the deal as fair, reasonable and adequate in light of the objections raised.
