Nike’s NFT Venture Results in Class Action Lawsuit

uring company, made a bold move into the world of NFTs in 2021 when it purchased the startup RTFKT. Collaborating with RTFKT, Nike released non-fungible tokens (NFTs) that showcased virtual shoes and hoodies for users to wear in the metaverse, a virtual realm.

The decision to enter the NFT space seemed logical at the time. During the peak of the NFT craze, individuals were willing to spend significant amounts of money for unique digital assets like CryptoPunks for their social media avatars. Combining the popularity of exclusive virtual items with Nike’s renowned brand would undoubtedly attract attention and investment.

Initially, the Nike NFT project was a success. The NFTs issued by RTFKT and Nike were easily tradable on various platforms, creating immediate liquidity in the markets. Prices surged, driven by the association with reputable names in 2021 and 2022.

The launch of the “Nike Cryptokicks” collection in April 2022 further solidified Nike’s position in the NFT market. The collection included 20,000 NFTs that quickly appreciated in value, with some rare items fetching over $100,000 each. Nike benefited from significant revenue from the initial sales and transaction fees in the secondary market, totaling tens of millions of dollars. The company incentivized NFT owners with rewards and exclusive access to limited-edition physical shoes, further enhancing the appeal of the NFTs.

However, the abrupt shutdown of RTFKT in December 2024 led to Nike’s complete withdrawal from the NFT space. This sudden exit caused prices to plummet, triggering accusations of a “rug pull” from the crypto community. A rug pull refers to a scenario where a token issuer abandons a project after collecting funds, leaving investors at a loss. Such practices are typically associated with dubious token creators, not large corporations like Nike.

In response to the rug pull, a group of investors initiated a lawsuit against Nike, alleging that the company misled investors by abruptly ending its NFT activities and devaluing the tokens. The NFTs were perceived as securities under the Howey test due to their public offering and potential for profit based on Nike’s actions. Investors, lacking expertise in assessing risks, claim they were deceived by Nike’s misrepresentation of the NFTs as non-securities, leading to inaccurate valuation and financial losses.

The lawsuit, spearheaded by Jagdeep Cheema on behalf of all investors, seeks $5 million in damages from Nike for its alleged deceptive practices. Nike’s involvement in the NFT market has significantly impacted both the company’s reputation and the trust of investors, highlighting the challenges of merging traditional brands with the rapidly evolving digital asset landscape.