Author / Matt Medved
Editor / far
Translated by / Centreless X
RTFKT (pronounced 'artifact') is a digital fashion and technology company acquired by Nike in 2021, which launched NFTs of digital and physical sneakers featuring the iconic Swoosh logo and announced a shutdown on December 3, 2024. On the shutdown day, the company stated on the X platform (formerly Twitter), 'Today we announce plans to gradually wind down RTFKT operations. Looking back, we are immensely proud of the achievements we made together.'
Since entering the NFT market in 2021 by selling sneakers worth $10,000 on the Nifty Gateway platform, RTFKT has rapidly established a large Ethereum-based ecosystem of NFTs and physical collectibles, collaborating with artists like Takashi Murakami.
After shutting down at the end of 2024, sportswear giant Nike faces a $5 million class action lawsuit. The plaintiffs are holders of the NFT brand RTFKT, which Nike acquired, and they claim that Nike hyped RTFKT NFTs using its brand influence and long-term vision, only to 'quietly abandon' the project, constituting a so-called 'soft rug pull'.
This lawsuit has become one of the most closely watched legal battles in the crypto world and may become a significant precedent for U.S. courts to systematically examine the nature of NFTs and brand liability, profoundly affecting the compliance boundaries for traditional companies in the Web3 industry.
What is a 'soft rug'?
Carlo D’Angelo, an experienced crypto lawyer, former law school professor, and author of (The DeFi Defender) newsletter, states that the key distinction in such cases is that a 'soft rug pull' is not a violent sell-off but rather when the project team gradually—yet with subjective intent or significant negligence—deviates from the original development roadmap, causing NFTs that originally had potential to gradually lose value.
The plaintiffs (NFT holders) will argue that Nike's brand promotion created reasonable expectations for the project to continue, and when Nike ultimately shut down RTFKT, it resulted in actual losses.
Nike may argue:
Nike RTFKT's NFTs are 'collectibles' rather than securities;
Companies do not have a legal obligation to indefinitely operate a commercially unsustainable project.
Does it involve 'unregistered securities'?
According to the current U.S. securities law determination standard (i.e., the 'Howey Test'), the court will judge whether RTFKT NFTs are sold as an 'investment contract'.
Carlo D’Angelo points out that although the U.S. Securities and Exchange Commission (SEC) is currently leaning towards a more lenient stance on crypto policy (especially in the context of Trump's return), the court will make independent judgments based on previous related cases rather than following the SEC's views.
This means: it is not easy for the plaintiffs to prove that these NFTs are securities.
Did Nike mislead consumers?
The case does not rely solely on 'securities law' litigation logic; the plaintiff team has also adopted a 'dual-path' strategy:
On one hand, accusing Nike of not providing sufficient disclosure when promoting NFTs;
On the other hand, citing consumer protection laws from states like New York and California, accusing Nike of failing to deliver on its promised 'future availability and ongoing support'.
Even if this strategy does not win 'securities recognition', it may succeed in claims from the consumer protection perspective.
Did the shutdown of RTFKT become key evidence?
To some extent, yes. The formal shutdown of the RTFKT brand is viewed by the plaintiffs as a key fact indicating that Nike abandoned the project and violated its promotional claims. NFT holders believe that their purchase of these digital assets was based on a 'reasonable expectation' that Nike would continue to invest resources and support the ecosystem.
How will the outcome of the case affect the entire Web3 world?
Carlo D’Angelo predicts: the court may dismiss 'securities claims', but it cannot be ruled out that the plaintiffs could achieve partial victory on the 'consumer rights' front.
Regardless of the outcome, this case serves as a warning to brands:
If the plaintiffs win, corporate behavior in the Web3 world will be scrutinized more strictly;
When companies launch NFTs in the future, they may need to avoid making commitments such as 'ongoing support' and 'future functionality' that are difficult to fulfill in the long run.
This could even lead to a decrease in the overall willingness of the brand to invest in NFTs.
Summary
Nike's RTFKT NFT case is not just an ordinary legal dispute; it will have the following three profound impacts on the Web3 world:
Judicial determination of whether NFTs constitute securities;
Do traditional brands need to be responsible for digital assets in the long term?
How companies balance innovation and legal risks in Web3.
In the future, perhaps every 'mint now, roadmap later' NFT project will face more accountability.
