Nike Faces $5M Class Action Lawsuit Over Sudden NFT Business Closure
Nike’s Abrupt Exit From Crypto Sparks Legal Battle
Nike Inc. (NYSE: NKE), one of the world’s most iconic athletic wear brands, is facing major legal heat after a group of disgruntled NFT investors filed a proposed class action lawsuit in federal court.
Filed on April 25 in Brooklyn, New York, the lawsuit alleges that Nike’s sudden shutdown of its RTFKT crypto division last December caused significant financial losses for buyers of Nike-branded NFTs and other crypto assets.
The lead plaintiff, Australian resident Jagdeep Cheema, claims that the closure caused demand for Nike-themed NFTs to collapse, leaving holders with depreciated digital assets and no viable secondary market.
“They would never have purchased the NFTs at the prices they did—or at all—had they known Nike would pull the rug out from under them,” the lawsuit states.
The plaintiffs are seeking more than $5 million in damages, citing alleged violations of consumer protection laws in New York, California, Florida, and Oregon.
Background: Nike’s Crypto Adventure and RTFKT Acquisition
Nike’s Big Bet on Digital Collectibles
Nike entered the NFT space in December 2021 by acquiring RTFKT Studios (pronounced “artifact”), a pioneering brand at the intersection of gaming, culture, and next-generation digital collectibles.
At the time, Nike hailed RTFKT’s vision as a key to its future innovation, with plans to blend physical products and digital experiences for a younger, more tech-savvy audience.
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NFTs linked to virtual sneakers, exclusive digital apparel, and gaming collaborations exploded in popularity.
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Investors and collectors believed that Nike’s entry validated NFTs as a serious investment class.
However, fast-forward to December 2, 2024, Nike quietly announced the complete winddown of RTFKT. The company positioned the move as a strategic evolution, claiming that RTFKT’s spirit would live on through “countless creators and projects” it inspired.
Investors Claim a “Rug Pull” and Securities Violations
NFTs as Unregistered Securities?
The lawsuit cuts deeper than just business disappointment. It accuses Nike of:
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Selling NFTs that could qualify as unregistered securities under U.S. law, and
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Failing to disclose material risks tied to the future viability of the RTFKT platform.
This taps into a larger, unresolved legal debate: Are NFTs securities?
If NFTs are deemed securities, Nike—and potentially many other companies—could face sweeping regulatory and financial consequences.
Phillip Kim, a lawyer for the plaintiffs, declined to comment. Nike has not yet responded to requests for comment as of the time of writing.
Footwear Stocks Under Pressure Amid Trump’s Tariff Threats
A Tough Climate for Retail Giants
Adding to Nike’s woes, tariff concerns stemming from former President Trump’s recent policy announcements are also weighing heavily on footwear stocks.
Trump’s call for higher tariffs on Chinese imports threatens to:
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Raise production costs for U.S. footwear brands,
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Squeeze profit margins, and
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Create supply chain disruptions for companies heavily reliant on overseas manufacturing.
Nike, already facing a delicate environment due to weakened consumer sentiment and now the NFT lawsuit, saw its stock drop 1.47% on Friday, closing at $57.62.
Although there was a slight after-hours recovery to $57.71, the stock’s underlying pressure suggests that investors are becoming increasingly wary of Nike’s strategic direction.
The Broader Implications for NFT Markets
A Cautionary Tale for Corporate NFT Ventures
Nike’s legal troubles offer a critical lesson for corporations rushing into crypto and Web3 experiments:
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Investor protections matter: Traditional consumer protection expectations apply even in new digital asset categories.
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Exit strategies must be clear: Companies can no longer assume that shutting down a crypto division will be consequence-free.
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Legal clarity is urgently needed: Until U.S. courts or regulators definitively rule on whether NFTs constitute securities, companies must tread carefully.
This case could potentially set a landmark precedent for the NFT and broader crypto markets, either by:
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Establishing clear rules for NFT consumer protections, or
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Highlighting the legal gray areas that companies like Nike must navigate.
Nike’s Crypto Gamble May Cost More Than Expected
What was once seen as an exciting leap into the future of fashion and gaming has now turned into a costly legal and reputational challenge for Nike.
While the $5 million sought in damages is relatively small for a corporation of Nike’s size, the real risk lies in regulatory scrutiny and brand damage.
The case—Cheema v. Nike Inc, U.S. District Court, Eastern District of New York, No. 25-02305—is one to watch closely as it could ripple far beyond just Nike and affect the entire Web3 corporate landscape.
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