Nike Faces $5M Lawsuit: What's Happening?

American sportswear brand Nike is facing a class-action lawsuit for allegedly operating a “rug pull” by shutting down its RTFKT NFT platform, rendering investors’ digital collectibles worthless.

A group of RTFKT NFT investors filed the Nike lawsuit in a Brooklyn federal court, saying that the NFT shutdown has led to financial losses "in excess of $5 million."

The lawsuit claims that the sportswear giant used its reputation to hype the sneaker-themed non-fungible tokens (NFTs) to collect investments, and later abruptly closed the platform.

The move caused the digital collectibles to plummet in value, leaving investors with huge losses, the lawsuit alleges.

“[This] case arises out of Defendant’s fraudulent and unlawful conduct in misselling and selling digital assets in the form of NFTs in an offering, promotion, and sale of unregistered securities in violation of Section 5 of the Securities Act,” the plaintiffs alleged in the lawsuit.

The class group said that the court doesn't need to determine the legal status of NFTs to resolve the complaint.

"Because the Nike NFTs derived their value from the success of a given promoter and project - here, Defendant and its marketing efforts - members of the Class purchased this digital asset with the hope that its value would increase in the future as the project grows in the popularity of the product and service offerings of a known and respected brand such as Defendant."

The lawsuit further claims that the sportswear company's actions have also breached consumer protection laws and other state unfair trade and competition laws.

The plaintiffs are seeking at least $5 million in damages from Nike for allegedly performing "unlawful acts, threatens, and menaces" against the class members.

The lawsuit comes amid heightened legal scrutiny of the crypto industry.

Recently, the US Securities and Exchange Commission shared renewed guidance on the classification of digital assets as securities. Moreover, the plaintiffs are hoping for swift action in the prolonged XRP lawsuit.

Meanwhile, NFT marketplace OpeaSea has requested the US SEC to exclude NFTs from federal securities laws. Their argument is based on the reported fact that NFTs do not meet the legal definition of a security.