In December 2021, Nike acquired RTFKT (pronounced "artifact"), a digital fashion and collectibles company founded in 2020 by Benoit Pagotto, Chris Le, and Steven Vasilev.12 The acquisition was part of Nike's strategy to accelerate its digital transformation and expand into the metaverse, with CEO John Donahoe stating it would allow Nike to "serve athletes and creators at the intersection of sport, creativity, gaming and culture."1 RTFKT had quickly gained prominence for creating virtual sneakers and NFT collectibles that merged physical and digital value, with their products selling out in minutes.3

Despite initial excitement about the partnership, Nike announced in December 2024 that RTFKT would "wind down" operations by the end of January 2025.45 The closure came shortly after Elliot Hill took over as Nike's CEO, signaling a shift in priorities as the company recalibrated its approach to digital innovation.5 While the terms of Nike's acquisition were never disclosed, rumors of a $1 billion purchase price were later refuted, with sources suggesting RTFKT was valued at approximately $33 million at the time.42 The abrupt shutdown ultimately led to the class action lawsuit, with plaintiffs claiming Nike had misled investors and left them with devalued digital assets.67

The lawsuit, filed in Brooklyn's federal court on April 25, 2025, is led by Australian resident Jagdeep Cheema and seeks at least $5 million in damages12. Plaintiffs make several key allegations against Nike:

• The complaint claims Nike NFTs were unregistered securities sold without SEC registration, violating securities laws34

• Plaintiffs argue they suffered "significant damages" when Nike abruptly shut down RTFKT, causing NFT values to "plummet" and become "substantially worthless"34

• The suit alleges Nike conducted a "brazen rug pull" by using "its iconic brand and marketing prowess" to promote the NFTs before abandoning the project56

• According to the filing, investors would never have purchased the NFTs "had they known that the Nike NFTs were unregistered securities or that Nike would cause the rug to be pulled out from under them"24

The class action alleges violations of consumer protection laws in New York, California, Florida, and Oregon27. While Nike has not yet publicly responded to the lawsuit, the case highlights ongoing legal questions about whether NFTs qualify as securities under U.S. federal law38.

The lawsuit's central claim revolves around the argument that Nike's NFTs qualify as securities under federal law. Plaintiffs apply the Howey Test to RTFKT's digital assets, asserting that investors purchased them with "the hope that their value would increase in the future as the project grows in popularity based on the Nike brand."12 The complaint emphasizes that the NFTs derived their value primarily from Nike's promotional efforts and marketing prowess rather than any inherent utility.34

Legal experts are watching the case closely as U.S. courts haven't definitively ruled on whether NFTs are securities. The lawsuit argues that Nike failed to register these digital assets with the SEC and neglected to disclose associated risks.56 However, the plaintiffs maintain that the court doesn't necessarily need to rule on the legal status of NFTs to address their complaint about Nike's alleged deceptive practices.1 This case joins a growing trend of NFT-related litigation, including DraftKings' recent $10 million settlement with customers who made similar securities law violation claims.7