Nike sued over closure of crypto business

Nike is facing a lawsuit from buyers of its NFTs and other cryptocurrency assets following the closure of its RTFKT unit in December 2024.

The lawsuit, filed by Australian resident Jagdeep Cheema in Brooklyn federal court, claims that the shutdown led to a decrease in NFT demand, causing significant financial losses.

Plaintiffs argue they would not have bought the tokens if they had known the assets were unregistered securities or that RTFKT would close so suddenly.

The plaintiffs are seeking damages over US$5 million for alleged violations of consumer protection laws in New York, California, Florida, and Oregon.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Nike’s dramatic NFT reversal highlights boom-and-bust cycle of corporate Web3 initiatives

Nike’s journey with RTFKT represents a case of corporate enthusiasm followed by retreat in the volatile Web3 space.

The company made a notable entry into NFTs by acquiring RTFKT in December 2021, when the digital collectibles market was near its peak 1.

At the time of acquisition, RTFKT had demonstrated market potential by selling $3.1 million worth of digital sneakers in just seven minutes during a launch event 2.

Nike’s CEO John Donahoe highlighted the acquisition as accelerating Nike’s “digital transformation” and enhancing its ability to serve at the intersection of “sport, creativity, gaming, and culture” 1.

Yet just three years later, Nike shut down the RTFKT unit in December 2024, despite previously declaring that RTFKT represented innovation that would continue through “countless creators and projects” it inspired.

This pivot from significant investment to shutdown reflects similar patterns seen with corporate NFT and metaverse initiatives that launched during the 2021-2022 hype cycle.

2️⃣ NFT legal classification remains in flux as courts weigh securities designation

The lawsuit against Nike touches on a critical evolving question in the blockchain space: whether NFTs should be classified as securities subject to federal regulation.

A landmark federal court ruling in 2023 determined that certain NFTs, specifically NBA Top Shot “Moments,” may indeed be classified as securities under the Howey Test framework used to identify investment contracts 3.