A group of non-fungible token (NFT) holders has filed a class-action lawsuit against Nike following the sudden shutdown of its RTFKT platform. The lawsuit alleges that Nike engaged in a “rug pull” by promoting sneaker-themed NFTs, profiting from both initial and secondary sales, and then shutting down the platform in January 2025. This left NFT holders facing significant losses and holding assets that had lost their value.

Details of the Class-Action Lawsuit

According to the filing in the U.S. District Court for the Eastern District of New York, the plaintiffs, led by RTFKT NFT holder Jagdeep Cheema, are seeking $5 million in damages. They are also requesting a jury trial to address their claims. The lawsuit accuses Nike of violating consumer protection laws and selling unregistered securities.

The plaintiffs argue that Nike’s NFTs meet the criteria for securities under the Howey Test. They claim buyers made monetary investments in a common enterprise, expecting profits that were tied to Nike’s efforts. The lawsuit states:

“As this type of digital asset is properly classified as a security under relevant law, the issuers of this type of token are required to register them and file relevant statements with the authorities and comply with relevant securities laws. The Nike NFTs were never registered as such.”

Nike’s Foray Into NFTs

Nike acquired RTFKT in December 2021, during the height of the NFT boom, as part of its broader strategy to embrace digital innovation. RTFKT gained recognition for its blend of fashion, gaming, and blockchain technology, attracting significant attention from both the crypto and sneaker communities.

RTFKT launched successful projects like CloneX and Cryptokicks, generating millions in sales. Buyers were promised gamified experiences, including quests, forging events, and exclusive drops that connected digital collectibles to real-world rewards. These promises helped establish RTFKT as a leader in the NFT space.

The Decline of RTFKT

As the NFT market cooled in 2023 and 2024, interest in RTFKT’s collections began to wane. In December 2024, Nike announced RTFKT would wind down operations after releasing its final drop, the “Blade Drop.” Nike framed the decision as an effort to preserve RTFKT’s legacy rather than a complete shutdown.

However, the plaintiffs claim Nike’s withdrawal devastated the value of the NFTs, many of which had previously traded for thousands of dollars. Additionally, promised features such as quests, rewards, and exclusive access to limited-edition products were abandoned. This led to the collapse of the secondary market and a sharp decline in NFT prices.

Impact on NFT Holders

RTFKT and Nike had marketed the NFTs with assurances of peer-to-peer trading and an active ecosystem where completing challenges and forging sneakers would generate real value. After the shutdown, these features disappeared, leaving NFT holders with assets that had lost their utility and worth.

“Predictably, prices plunged and did not recover. Investors – some of whom are cited in this complaint – and the crypto community at large lamented Nike’s brazen rug pull,” the lawsuit stated.

Key Takeaways for NFT Investors

This case serves as a reminder for NFT investors to carefully evaluate projects and their promises before committing funds. Here are some tips to consider:

  • Research the company: Ensure the issuer has a proven track record and commitment to transparency.
  • Understand the ecosystem: Look for projects that offer sustainable value and long-term utility.
  • Monitor market conditions: Keep an eye on broader trends in the NFT and cryptocurrency markets.
  • Be cautious of guarantees: Avoid projects that make unrealistic promises or appear overly reliant on hype.

As the legal proceedings unfold, this case could set significant precedents for how NFTs are classified and regulated in the future.

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