Judge holds digital trading cards are securities under the Howey test in KM lawsuit against DraftKings

JULY 3 - U.S. District Judge Denise Casper has held that digital trading cards sold by fantasy sports company DraftKings are securities under the U.S. Supreme Court’s Howey test, denying the company's motion to dismiss a class action lawsuit led by KM Partner Tony Fata.  The lawsuit alleges that, during the class period, DraftKings sold unregistered securities and ensured that money stayed on DraftKings’ private and exclusively controlled marketplace, propping up the market for an overall valuation of DraftKings’ NFTs and significantly harming investors.  

The questions of whether NFTs should be considered securities and if NFT issuers can be liable for selling unregistered securities is on the leading edge of efforts to categorize and regulate these emerging marketplaces. "We wholeheartedly agree with Judge Casper's judgement that the digital trading cards sold by DraftKings are securities under the Howey test, and we're excited to continue to pursue recovery on behalf of our clients," said Mr. Fata. 

Visit Reuters for more information on the case and ruling.