- Investors sued Nike for over $5 million after the sudden shutdown of its RTFKT NFT division.
- According to plaintiffs, Nike sold unregistered securities and caused NFT values to plummet steeply.
- The lawsuit could be a major precedent on how U.S. securities laws treat NFTs.
A group of investors has filed a lawsuit against Nike, claiming they suffered significant losses after the company shut down its NFT venture. The lawsuit was submitted to the U.S. District Court, Eastern District of New York.
Australian investor Jagdeep Cheema and other plaintiffs say that when Nike closed its RTFKT digital collectibles unit in December 2024, its closure destroyed the value of the NFTs the plaintiffs had bought. The group is seeking more than $5 million in damages, citing breaches of consumer protection laws in New York, California, Florida, and Oregon.
Plaintiffs Allege NFTs Were Sold as Unregistered Securities
Among the allegations in the lawsuit, plaintiffs say that Nike sold the NFTs to consumers without having it properly registered as a security under U.S. They claim they wouldn’t have bought unregistered digital assets that could be unsupported in the future.
According to Cheema and other buyers, the shutdown saw demand for the NFTs to collapse. Part of the problem is that some NFTs stopped displaying images, replacing them instead with an error message from web service providers. Nike has yet to speak about the pending litigation. Also, Phillip Kim, the plaintiffs’ attorney, declined to provide additional comments.
The complaint touches upon a more general legal question, of whether the NFTs should be governed by the securities laws. Under U.S. law, NFTs remain unclassified, and several similar cases are pending in courts across the country. Should the court agree with the plaintiffs, it might give a precedent for how projects related to NFTs are considered under securities laws in the future.
RTFKT Shutdown Sparks Technical Issues and Investor Frustration
In December 2021, Nike bought RTFKT, heralding the deal as a future of innovation for fashion and gaming. RTFKT, also known as “artifact” became linked to Nike’s desire to blend digital collectibles into its brand identity. Yet, on December 2, 2024, Nike announced the termination of RTFKT without giving notice to its NFT holders. After the shutdown, users reported problems with their digital collectibles across the board.
Several RTFKT NFTs like Clone X failed to load correctly. But instead of digital artworks, holders saw Cloudflare error pages stating that the servers no longer hosted the content. The technical failure added buyers’ fears that Nike had given up on supporting current NFTs. It was speculated that the company had stopped paying for server infrastructure needed to keep the NFT visuals running.
Many investors have felt disappointed despite Nike’s statement that RTFKT’s spirit would ‘live on’ through creators and future projects. They claim that Nike has diminished their assets and shaken confidence in digital collectibles connected to centralized services.
The case, Cheema v. Nike Inc., serves as an indicator of increasingly tense relationships between buyers and big brands in the NFT market. Litigation around NFTs is accelerating and more companies may come under the legal scanner for how they are doing business and managing the emerging assets. Nike’s outlook on this lawsuit will impact the standards for any future NFT issuers and big corporations moving into the blockchain scene.
