Nike Faces $5 Million Lawsuit Over NFT Platform Shutdown

Nike is facing a class-action lawsuit demanding $5 million in damages, alleging that the company violated consumer protection and unfair trade laws by abruptly shutting down its NFT platform, RTFKT, in January. The lawsuit, filed in a Brooklyn federal court, claims that a group of RTFKT users, led by Jagdeep Cheema, suffered significant financial losses after Nike promoted its sneaker-themed NFTs to attract investors and then closed the platform.

The plaintiffs argue that the NFTs were unregistered securities because Nike sold them without registering with the Securities and Exchange Commission. They accuse Nike of leveraging its brand and marketing skills to hype and promote these unregistered securities. The lawsuit states that the NFTs’ value was tied to Nike's brand and marketing success, leading investors to purchase them with the hope of future value increases as the project gained popularity.

The suit emphasizes that Nike’s decision to shut down the platform caused damages to investors, as the NFT prices plummeted and investors lost opportunities to complete challenges and quests that initially motivated their purchases. The value of Nike's NFTs, which once traded around $8,000, dropped significantly, with some now worth only about $16.

Although U.S. courts have not definitively classified NFTs as securities, a recent letter from OpenSea to the SEC argued that NFTs should not be considered securities under federal law. The lawsuit does not require a ruling on the legal status of NFTs to proceed.

Nike had acquired RTFKT Studios in 2021, known for virtual sneakers and NFT collections. The company promoted these NFTs as tradable peer-to-peer on secondary markets and usable in challenges that could yield rewards. However, after Nike shut down RTFKT, the NFT market experienced a sharp decline, with total sales dropping by 63% in the first quarter of 2025 compared to the previous year