DraftKings Allegedly Received Preferential Treatment from Polygon in Validator Network Deal
On October 2021, DraftKings announced a partnership with cryptocurrency Polygon to introduce nonfungible tokens (NFTs) on DraftKings Marketplace. Polygon, ranked as the 21st digital currency by market value at the time, has since climbed to the 14th spot, raising questions about the nature of its relationship with DraftKings.
An article published by Danny Nelson in CoinDesk suggested that Polygon paid DraftKings “millions of valuable MATIC tokens” to run a Polygon validator network. This arrangement followed a March 2022 announcement that DraftKings would partner with Zero Hash to stake digital assets in its treasury to support the Polygon (MATIC) blockchain network.
However, Polygon did not disclose compensating DraftKings to run one of its validator networks, and the validator is currently not operational. On-chain data confirmed that DraftKings received “millions of dollars in crypto directly from Polygon” and earned even more through the staking relationship, leading to speculation that Polygon may have suffered losses on the deal. None of Polygon’s other network validators received similar treatment.
While DraftKings and Polygon have not commented on these allegations, it’s clear that the deal was profitable for both parties. When the partnership was announced, the value of Polygon surged from $1.76 to $2.77, although it currently trades at 76.22 cents.
According to an unidentified Polygon executive, DraftKings was not considered an “equal community member,” as they received unusually large compensation for the defunct validator network. Sandeep Nailwal, Polygon’s cofounder, had initially stated that DraftKings would be an “equal community member.”
In a move to address the issue, Polygon removed DraftKings from the validator program last month; however, the two companies continue to have an NFT relationship, and DraftKings aims to be reinstated as a Polygon validator in the future.