Nike’s upcoming lawsuit, which is centered around its non-fungible tokens (NFTs), could see plaintiffs in the case demand damages of more than $5 million. The complaint brings claims for violation of consumer protection laws in every state that loans were made to. The central dispute is around the claim that Nike’s NFTs are unregistered securities, resulting in economic harm to investors.
Jagdeep Cheema, a resident of Australia, is leading the class action lawsuit against the athletic apparel behemoth. The suit claims that Nike’s NFT offerings were illegal under consumer protection statutes. Specifically, it aims for all-inclusive regulations alone in New York, California, Florida, and Oregon.
Under the law, the plaintiffs say they were tricked into buying Nike’s NFTs. First, they claim they would have prevented such irresponsible investments in digital assets. This would have been the considered decision had they appreciated the regulatory risks associated with unregistered securities. Additionally, the lawsuit alleges that the plaintiffs were not informed about the planned closure of RTFKT, a virtual fashion platform acquired by Nike in December 2021, which significantly impacted the value and utility of the NFTs.
The complaint alleges that Nike’s sudden action was the functional equivalent of “pulling the rug out” from under investors. This is precisely what the plaintiffs are alleging—that Nike deliberately lured them into the world of NFTs. They believe that Nike did not sufficiently disclose the costs and risks associated with its program.
The lawsuit raises some critical issues regarding the regulation of NFTs. It further explores the obligations of entities that publicly sell or exchange these digital assets. The space around digital assets is extremely fast-moving. Legal challenges such as this one are necessary to produce strong precedents, such as the precedent set with respect to consumer protection and disclosure requirements.
