Nike is the subject of a class action lawsuit filed by a group of buyers of Nike-themed non-fungible tokens (NFTs), who claim the company engaged in deceptive practices related to its now-defunct NFT subsidiary, RTFKT. The lawsuit, filed last Friday, seeks over $5 million in damages and alleges that Nike orchestrated a rug pull, a term used to describe when developers abruptly abandon a project after collecting funds.

Nike Faces $5 Million Lawsuit

The plaintiffs argue that Nike promoted the NFTs as valuable digital assets, leveraging its established brand and marketing power to support the RTFKT project. They allege that these NFTs constituted unregistered securities, which were marketed and sold without appropriate disclosures. The investors state that they relied on Nike’s involvement as a sign of credibility and long-term commitment to the project.

Nike Faces $5M Lawsuit Over RTFKT NFT Saga

Shutdown of RTFKT and Decline in NFT Value

RTFKT, which Nike acquired in late 2021, officially announced in December that it would wind down operations by the end of January. Following this announcement, the market value of the NFTs issued under the RTFKT brand declined significantly. Plaintiffs in the case claim that they would not have purchased the NFTs, or would have paid less for them, had they known about the potential for the platform's closure or the regulatory issues related to the NFTs’ classification.

The lawsuit highlights that the NFTs were built to be traded on secondary markets, implying an expectation of liquidity and value appreciation. With RTFKT’s shutdown, the ability to trade these assets meaningfully was affected, and the plaintiffs allege this led to substantial financial losses. The class action includes claims of consumer protection violations in several states, including New York, California, Florida, and Oregon. It also asserts that Nike’s actions were misleading, as the company did not disclose key risks to potential buyers.

Nike Faces $5M Lawsuit Over RTFKT NFT Saga

Role of Digital Collectibles in the Web3 Space

These claims may test how courts evaluate the legal status of digital assets and the responsibilities of large corporations operating in the web3 space. In addition to the lawsuit, recent technical issues added to concerns among NFT holders. Images linked to RTFKT’s digital collectibles temporarily disappeared from the platform. Samuel Cardillo, head of technology at RTFKT, later explained that the issue was due to a problem with their cloud service provider, Cloudflare.

Although the images reappeared, the incident raised further uncertainty about the long-term accessibility and support for the NFTs. As of now, Nike has not issued a public response to the lawsuit or the specific allegations. The outcome of this case could influence how other companies approach digital assets and web3-related ventures, particularly in areas concerning consumer transparency, asset classification, and regulatory compliance.