Nike is currently facing a lawsuit from a group of buyers of NFTs who claim to have lost hundreds of thousands of dollars after the sportswear giant shut down its digital collectibles arm, RTFKT. The lawsuit was filed in Brooklyn, New York, with Australian investor Jagdeep Cheema leading the plaintiffs.
The investors allege that Nike’s decision to abruptly close RTFKT in December 2024 caused the NFTs’ value to plummet. These digital assets, created and sold under the Nike and RTFKT brands, were left unsupported, with some NFTs even failing to display images correctly after the shutdown.
The lawsuit argues that had the buyers known that the NFTs were unregistered securities or that Nike would terminate the project so suddenly, they would not have invested in them. Seeking damages of at least $5 million, the plaintiffs claim that Nike violated consumer protection laws in various U.S. states, including New York, California, Florida, and Oregon.
As the legal battle unfolds, a crucial question arises: are NFTs considered securities? This inquiry remains a contentious issue for U.S. regulators and courts, raising concerns among investors about their rights and protections when purchasing such assets.
The case against Nike adds to a growing trend of litigation involving NFTs and crypto assets, highlighting the lack of clear rules and accountability in the rapidly expanding digital collectibles market. This lawsuit could establish a precedent for addressing losses related to NFT investments.
RTFKT, which stands for “artifact,” was once viewed as Nike’s foray into the future of fashion and gaming. However, following its closure in December 2024, users reported technical glitches with their NFTs, including missing images and server issues. This raised doubts about the long-term value of digital art tied to a centralized service.
While Nike stated that the innovation from RTFKT would live on through inspired creators and projects, many buyers remain skeptical. The fallout from the shutdown has underscored the risks associated with investing in NFTs and the importance of regulatory clarity in the burgeoning digital asset market.
The lawsuit against Nike serves as a cautionary tale for investors navigating the complex and evolving landscape of NFTs, emphasizing the need for transparency, accountability, and legal safeguards in the digital collectibles space.