Nike RTFKT Rug Pull Lawsuit

A group of non-fungible token (NFT) users is suing Nike for allegedly operating a rug pull by shutting down its RTFKT platform and crypto project earlier in 2024.

The class members, who bought and hold the hyped sneakers NFTs, claimed they suffered "significant damages" as a result of the sportswear giant touting its sneaker-themed NFTs to gain investors, then shutting down the platform and devaluing the tokens.

The proposed class suit was filed in a Brooklyn federal court on April 25 by Jagdeep Cheema et al. against Nike and its wholly-owned subsidiary RTFKT. It claims the NFTs were unregistered securities, as they were sold without being registered with the U.S. Securities and Exchange Commission.

"Unwilling to subject itself to the registration requirements and investor protections imposed by federal securities law, or to disclose material information about RTFKT and the advertised programs and opportunities, Nike elected to sell the NFTs in an unregistered, unlawful manner," the lawsuit claims.

It accused the company of using "its iconic brand and marketing prowess to hype, promote, and prop up the unregistered securities that RTFKT sold."

"Because the Nike NFTs derived their value from the success of a given promoter and project — here, Nike and its marketing efforts — investors purchased this digital asset with the hope that its value would increase in the future as the project grows in popularity based on the Nike brand," the lawsuit argued.

The lawsuit asks for at least $5 million in damages, claiming Nike broke consumer protection laws and violated various state unfair trade and competition laws. It also seeks an injunction to prevent further unlawful conduct by Nike.

A U.S. court hasn't definitively ruled on whether NFTs are securities. Still, in an April 9 letter to the SEC, marketplace OpenSea urged the regulator to exclude NFTs from federal securities laws, arguing they don't meet the legal definition of a security.

In its case against Nike, the class group said that the court doesn't necessarily need to rule on the legal status of NFTs to address the complaint.

"Even if the Court does not determine that the digital assets at issue are 'securities' within the meaning of Section 12(a)(1) of the Securities Act, the complaint presents viable claims for relief under state and federal consumer protection laws," the lawsuit said.

NFT market value dips

In 2021, Nike acquired the NFT firm RTFKT Studios, which created virtual sneakers and avatars, in a bid to expand in the metaverse.

According to the complaint, the RTFKT NFTs were sold to the public in batches in late 2022 and early 2023. They could be traded peer-to-peer on the secondary market and used to complete challenges and quests that could lead to rewards.

"The value of the NFTs plummeted after RTFKT abruptly shut down the program and ceased providing new content and opportunities for performance in early 2024, and the secondary market for the NFTs dried up substantially," the lawsuit claims.

Nike’s crypto kick NFT collection was changing hands for an average of 3.5 Ether (ETH), or around $8,000 when they were first listed on April 18, 2022, but were trading for around 0.009 Ether, or roughly $16 as of April 21, according to OpenSea.

The performance of the secondary market for the NFTs aligns closely with the broader downturn in the NFT market in 2024.

After hitting a record high of $25 billion in the fourth quarter of 2023, the overall NFT market dropped sharply in the first quarter of 2025, with sales plunging 63% year-over-year, to $1.5 billion in total sales from January to March 2025, down from $4.1 billion during the same period in 2024, according to CCData.

The average price of an NFT also slid to 0.8 ETH in the first quarter, down from 1.5 ETH in the fourth quarter of 2024 and 2.4 ETH a year ago.

The class group claims that the chance to take part in the challenges and quests was a primary reason for purchasing the tokens.

"The members of the class purchased, traded in, and held the RTFKT NFTs in reliance upon the representations and omissions of Nike and RTFKT concerning the advertised programs, products, services, and opportunities that would be offered through the RTFKT platform," the lawsuit said.

"To the class members' surprise and dismay, at the beginning of 2024, less than one year after the NFTs were sold to the public, RTFKT abruptly shut down the program and ceased providing new content and opportunities for performance in connection with the NFTs."