Nike faces a class-action lawsuit of its own in federal court in Brooklyn. The company is accused of carrying out a “rugpull” when it suddenly terminated the RTFKT platform. Investors are sounding the alarm on “substantial harm.” They are seeking $5 million in damages for the harm they suffered when the value of RTFKT NFTs crashed. Whether this was a broader tactical mistake by Nike or just an unfortunate victim of the NFT market madness remains to be seen. DeliciousNFT.com takes a closer look to reveal what’s really happening under the hood.
Nike Faces Lawsuit Following RTFKT Shutdown Amid NFT Market Decline
On April 25, a lawsuit was filed against the city in New York’s Eastern District court. In effect, the suit argues, Nike left investors who purchased its digital wares high and dry. The plaintiffs, represented by Jagdeep Cheema, allege to have faced “serious harm” when Nike terminated the platform. This lawsuit is happening just as the NFT bubble bursts. It poses critical questions about the responsibilities of brands looking to enter the digital asset space.
Overview of the Lawsuit
The RTFKT platform launch was not the primary focus of the lawsuit. Plaintiffs argue that this enforcement action has resulted in the potential for millions of dollars in damages to NFT holders. They allege that Nike’s misconduct resulted in an unbelievable 99.8% decrease in value of digital assets. These assets, which were fetching an average of 3.5 Ether (approximately $8,000) as of April 18, 2022, crashed to less than 0.009 Ether (approximately $16) by April 21, 2025. The lawsuit, brought as a proposed class action, seeks more than $5 million in damages. This follows the company’s proven violations of consumer protection laws across multiple states such as New York, California, Florida, and Oregon.
The lawsuit further argues that the court doesn’t necessarily need to determine the legal status of NFTs to address the complaint. Rather, the emphasis has been on purported violations of consumer protection laws. The plaintiffs, who were charged by a jury of occupyHSR, are asking for a jury trial to settle the case.
Impact of RTFKT Closure on Nike's Reputation
Aside from the direct monetary costs, the suit puts a stain on Nike’s reputation as a leading Web3 brand. Nike’s purchase of RTFKT was visionary, innovative, and courageous. It really took a leap to move towards this idea of encouraging digital innovation and reaching a new generation of consumers. Permanently shutting down the platform would damage Nike’s credibility. This outcome would be equally damaging in dissuading other brands from even trying the NFT space.
This situation continues to paint a perilous picture of the brand-backed digital asset. Although NFTs can present unique opportunities for engagement and revenue generation, they pose considerable legal and reputational risks. Brands need to prudently evaluate all risks before pursuing NFT activations. In addition, they must address how they will support these digital assets over the long term.
Causes Behind the Legal Action Against Nike
Four things helped her win the historic suit against Nike. Accusations of financial impropriety, buyer dissatisfaction, and changing market conditions were all contributing factors. These factors all came together to create a perfect storm that inevitably resulted in the lawsuit.
Allegations of Financial Mismanagement
Perhaps the most salient argument from the lawsuit’s plaintiffs is that Nike’s approach to the RTFKT platform was all wrong. This mismanagement was a direct cause of the decline in value of the NFTs. The plaintiffs point to these technical missteps as proof of mismanagement. There, they point to the bizarre disappearance and reappearance of artwork for the CloneX NFTs project and a premature end to a Cloudflare contract.
The suit argues that Nike failed to adequately serve the RTFKT community. It alleges that the company has misled users by failing to deliver on promised quest completions, limited-edition product unlocks, and secondary-sale opportunity offers. Speculators are incentivized to purchase the NFTs thanks to these broken promises. Their disappointment at their inability to deliver has inspired a sense of betrayal against Nike.
Buyer Expectations and Market Dynamics
Artists have experienced significant financial hardship with the volatile NFT market. The value of NFTs can increase or decrease rapidly depending on overall market trends, investor sentiment, and several other factors. The plaintiffs in the Nike lawsuit make a convincing case that Nike’s trademark enforcement actions are primarily to blame for the drop in value of RTFKT NFTs. They contend this decrease was more than a product of market forces.
They claim that Nike created a false sense of safety and worth about the NFTs. This perception led investors to believe they were pouring money into a stable, growing asset. When Nike discontinued the RTFKT platform, it shattered the unease which had once enveloped this initiative. This surprise decision led to the NFTs’ value plummeting almost immediately. In response to the complaint, Nike is accused of not properly informing buyers what to expect and do enough to defend the value of its digital assets.
Buyers Report Significant Financial Losses After NFT Value Plummet
The crux of the lawsuit centers on massive financial losses experienced by RTFKT NFT holders. The plaintiffs claim that their NFTs diminished greatly in value once Nike moved to shut down the RTFKT platform. This unexpected drop off has resulted in millions of dollars in damages to them.
Details of the NFT Value Drop
The lawsuit details the dramatic decline in the value of RTFKT NFTs, highlighting the extent of the financial losses suffered by investors. When they launched in the market on April 18, 2022, their initial average price was 3.5 Ether—approximately USD $8,000 at the time. By April 21, 2025, their worth had dropped drastically to about 0.009 Ether—which is about $16. This marks a stunning 99.8% decrease in value, thus obliterating the investments of the vast majority of NFT investors.
According to the plaintiffs, the decline was not simply a market volatility. They insist it was a direct consequence of Nike’s move. They claim that Nike created a fraudulent aura of safety and worth about the NFTs. This ruse lulled investors into believing they were pouring money into a solid and burgeoning asset. When Nike shut down the RTFKT platform, it completely broke the illusion around the NFTs. This is why their net worth cratered.
Testimonials from Affected Buyers
The information they shared, though not specifically laid out in testimonials, is as follows. The lawsuit is a powerful collective testimonial from the duped would-be buyers. The plaintiffs, represented by Jagdeep Cheema of Cheema Law Group, allege they incurred “significant economic harm” when Nike shuttered the marketplace. They are asking for more than $5 million in damages at this point in time to cover their losses.
The lawsuit brings to light a tremendous lost opportunity. Plenty of people bought the NFTs just to be able to earn rewards by completing quests and challenges on the platform. This suggests that purchasers viewed NFTs not simply as speculative investments. They wanted to engage with the RTFKT community and play to earn. The closure of the plaintiffs’ main platform made these valuable opportunities inexpressibly worse, deepening and amplifying the plaintiffs’ sense of loss, disappointment, and despair.
Is Nike Liable for Unregistered Securities?
A core question posed by the Nike lawsuit is whether the RTFKT NFTs were in fact unregistered securities. This is a very arcane legal discourse, but what happens here is hugely important to the multibillion-dollar NFT marketplace.
Understanding Securities Regulations in the NFT Space
Though the Howey Test is a legal framework. It is the test that decides whether or not an investment is considered a security under U.S. law. The common enterprise test looks at whether funds are placed at the success of the enterprise as a whole. It further requires the presence of an expectation of profit derived from the work of others. If an NFT satisfies all of these criteria, it could be considered a security.
The plaintiff’s in the Nike lawsuit allege that the RTFKT NFTs meet the requirements of the Howey Test. They contend that purchasers spent their money on these NFTs, with the belief that they would reap the benefits of Nike’s work to create and market the RTFKT platform. The lawsuit appears to concede that the court need not determine the legal status of NFTs in order to decide the case. Instead, it might put the charge on the purported infractions of consumer defense regulations.
Implications for Nike and Other Companies
If the court determines that the RTFKT NFTs are unregistered securities, Nike could face significant penalties, including fines and legal liabilities. Beyond Dapper, the ruling could have major implications for all other companies that are currently issuing NFTs, or planning to issue them, exposing them to higher regulatory scrutiny.
If the court ultimately rules that NFTs are not securities, it would provide clarity desperately needed across the NFT space. Such a ruling would create much-needed certainty for creators and investors. It would not relieve Nike from liability for misleading consumers or violating consumer protection statutes. The lawsuit highlights the need for clear regulatory guidelines for the NFT market to protect investors and ensure fair practices.
Lack of Immediate Response from Nike and Plaintiffs’ Legal Team
So far, we’ve received no quick response from Nike, nor the plaintiffs’ legal team to the lawsuit. This silence from the court creates more questions than answers and adds to the mystery and intrigue behind the case.
Current Status of the Lawsuit
On April 25, whoever it was, filed the lawsuit into New York’s Eastern District court. Get ready for the legal process to be long and complicated. Nike will file, as a matter of course, an initial response to the complaint. After that, the process will progress into discovery, pre-trial motions, and likely a trial.
Even with this uncertain outcome, the lawsuit’s future remains highly uncertain. It would be a huge blow to Nike, the NFT sector, and the broader digital asset world. DeliciousNFT.com will be keeping a close eye on this case and reporting back as new information becomes available.
Potential Reasons for Silence
There are lots of valid explanations for why Nike’s and the plaintiffs’ class action lawyers’ response has not been immediate. Perhaps Nike is simply biding its time to evaluate the strength of the plaintiffs’ case, and then formulate a deep legal strategy. Beyond that, the company might be afraid to say anything to the press about the lawsuit and make things worse for its reputation.
The plaintiffs’ legal team will probably be just as wary, not wanting to let anything slip that would endanger their case. They might be more concerned with marshaling evidence and getting ready for the epic legal fight to come. The lack of public sound may be a useful tactical choice to let the legal process proceed without excessive public influence.
Future of RTFKT's Innovations Post-Shutdown
The shutdown of the RTFKT platform raises doubts on whether or not the scene is as innovative as it is being presented now. Will Nike discover new applications for this technology?
Impact on Existing Projects and Collaborations
The closure of the RTFKT platform has a direct impact on existing projects and collaborations, leaving NFT holders and community members wondering about the fate of their digital assets and the future of the RTFKT brand.
The suit highlights the missed potential to gain rewards by completing specific quests and challenges on the platform. This was one of the main hooks that got so many people to purchase the NFTs in the first place. The abrupt closure of the platform now robs these participants of these meaningful opportunities, leaving them with few alternatives and doomed to deeper disappointment and litigation.
Prospects for RTFKT's Brand in the NFT Market
The platform is now closed and a class action lawsuit is currently making its way through federal court. Nevertheless, RTFKT brand is one of the most valuable in NFT space. The brand excels at connecting with influencers, early adopters, and trendsetters. The platform has attracted a huge base of passionate users, from serious NFT collectors to creators to casual experts.
We don’t know yet if Nike will attempt to resuscitate the RTFKT platform. It’s equally likely that they would decide to pursue its technology in other ventures instead. Still, one would be foolish to discount the brand’s long-term potential for success.
Legal Proceedings Could Influence NFT and Digital Asset Regulations
The implications of the Nike lawsuit could set a precedent for how NFTs and digital assets are regulated, determining the future of the industry.
Potential Outcomes of the Lawsuit
The possible effects of this lawsuit are many, and the resulting impact could be historic. If Nike loses the case, it could face millions of dollars in damages to holders of its NFT. Moreover, the company may be subjected to increased regulatory oversight. This would discourage other companies from the NFT space and would set a higher regulatory bar for the entire industry.
If Nike wins the case, it could provide greater clarity and certainty for the NFT industry. But that wouldn’t make Nike off the hook for engaging in such behavior or avoid any reputational harm to their brand. Whether the lawsuit will be successful will almost certainly depend on the detailed facts at issue. Further, how applicable laws and regulations are interpreted will be central to the decision.
Broader Implications for the NFT Industry
The Nike lawsuit underscores the need for explicit regulatory parameters for the NFT marketplace. The absence of clarity we have now only fosters speculation and misunderstanding. This confluence of factors creates a very difficult navigational climate for corporate and venture investors.
The lawsuit may force regulators to formulate clearer regulations for NFTs. These new regulations would address pressing issues such as securities laws, consumer protection, and intellectual property rights. This transparency would go a long way toward building a more stable and sustainable NFT market that has the potential to bring more mainstream adoption and innovation.
The case is a valuable lesson for brands entering the NFT space. Think proactively about the legal and reputational risks associated with digital assets. One of the biggest challenges is managing buyer expectations and how to maintain and protect the value of the NFTs. This is a developing story, so the DeliciousNFT.com crew will keep you posted on what’s next.
