A collective of upset NFT purchasers has brought a lawsuit against Nike after the company shut down its digital collectibles division, RTFKT.
According to a report by Reuters, the lawsuit, filed Friday in Brooklyn, New York, alleges that the sportswear colossus’s sudden shutdown erased hundreds of thousands of dollars’ worth of digital asset value.
Australian Investor Leads Legal Fight Against Sportswear Giant
Australia-based lead plaintiff Jagdeep Cheema leads the class of plaintiffs that is demanding at least $5 million in damages. According to court filings, Nike’s December 2024 shutdown of RTFKT left investors with worthless digital tokens created and sold on both the Nike and RTFKT brands.
The complaint states Nike breached consumer defense laws in a number of states, including New York, California, Florida, and Oregon. Nike, headquartered in Beaverton, Oregon, has yet to respond to the claims.
Lawsuit Puts Key Question: Are NFTs Securities?
The court filing contends Nike sold the NFTs without registering them properly with financial authorities. This poses a basic question that US regulators and courts are still grappling to answer: Are NFTs securities subject to regulatory scrutiny?
Purchasers said the company provided no notice before cancelling the initiative. Numerous NFTs ceased to show images properly, contributing to fears the assets would no longer be supported or held their worth.
They wouldn’t have bought any of the NFTs if they had known they were unregistered securities, the plaintiffs said in their lawsuit. The group also alleged they would not have invested if they had known Nike could cancel the project so soon after its inception.
Technical Issues Haunt Digital Assets Following Service Shutdown
After the December shutdown, numerous users complained of severe technical problems with their NFTs. Images of highly prized objects in the Clone X series went missing, being replaced with “holding page” messages from Cloudflare stating that the content was taken down.
This led speculation that Nike stopped paying for servers that were displaying the NFT images. While some digital works have resurfaced online afterward, the incident raised legitimate doubts about the ultimate value of digital art attached to centralized services.
Nike’s NFT Adventure Had Brief But Memorable Existence
RTFKT (pronounced “artifact”) was bought by Nike in December 2021 at the peak of NFT popularity. The sports company termed the acquisition as a bold step into the future of collectibles and fashion and gaming.
The attorney for the plaintiffs, Phillip Kim, has yet to comment further on the case.
When digital collectibles became trendy, numerous firms jumped in without set regulations or oversight mechanisms. This suit identifies the danger that comes with large corporations testing and then abandoning nascent digital asset segments.
Featured image Nike, chart from TradingView
