Nike Faces $5M Lawsuit Over RTFKT Shutdown

Nike is currently facing a significant legal challenge as a group of investors have filed a class-action lawsuit against the company. The lawsuit, filed in Brooklyn federal court, alleges that Nike's abrupt shutdown of its digital collectibles venture, RTFKT, in December 2024, resulted in the collapse of the market for its branded non-fungible tokens (NFTs) and related cryptocurrency assets. The plaintiffs, led by Australian resident Jagdeep Cheema, claim that Nike orchestrated a "rug pull" by shutting down the platform without adequate warning, leading to substantial financial losses for investors.

The investors argue that they would not have purchased the NFTs at the prices they did, or at all, had they been aware of the regulatory risks associated with NFTs and the potential for Nike to abandon the project. The lawsuit seeks more than $5 million in damages, citing alleged violations of consumer protection laws in several states, including New York, California, Florida, and Oregon. The plaintiffs contend that Nike failed to disclose that the NFTs were unregistered securities and that the company could shut down the project without notice.

Nike entered the NFT space in 2021 with the acquisition of RTFKT, a digital fashion and collectibles brand that combined gaming, culture, and blockchain technology. The company promoted this acquisition as a significant step into next-generation innovation. At its peak, RTFKT's NFTs generated around $168 million in sales, driven by Nike's marketing efforts and the growing excitement around digital ownership. However, the momentum for RTFKT began to wane, leading to its eventual winddown in December 2024. Nike stated that the spirit of innovation would continue through creators and projects inspired by the brand, but this did not mitigate the impact on investors who had purchased NFTs.

The lawsuit raises broader questions about how brands should approach Web3 ventures, especially as regulatory scrutiny over digital assets continues to intensify. The legal classification of NFTs under US securities law remains unsettled, adding to the complexity of the situation. Investors are seeking clarity and accountability from Nike, highlighting the need for better disclosure and risk management in the rapidly evolving digital asset market. Nike has not yet commented on the lawsuit, leaving the outcome uncertain as the legal process unfolds.