Author / Matt Medved

Editor / far

Translation / Centreless X

RTFKT (pronounced "artifact") is a digital fashion and technology company that was acquired by Nike in 2021. During this period, it launched NFT digital and physical sneakers featuring the iconic Swoosh logo, and announced its closure on December 3, 2024. On the day of the closure, the company stated on the X platform (formerly Twitter), "Today we announce plans to gradually wind down RTFKT's operations. Looking back, we are incredibly proud of the achievements we made together."

Since entering the NFT market in 2021 by selling sneakers worth $10,000 on the Nifty Gateway platform, RTFKT quickly established a vast ecosystem of Ethereum-based NFTs and physical collectibles, collaborating with artists like Takashi Murakami along the way.

After its closure at the end of 2024, sports brand giant Nike faces a $5 million class-action lawsuit. The plaintiffs are holders of the NFT brand RTFKT, which Nike acquired, claiming that Nike leveraged its brand influence and long-term vision to hype RTFKT NFTs, only to "quietly abandon" the project, constituting a so-called "soft rug pull."

This lawsuit has become one of the most closely watched legal battles in the crypto world and may serve as a significant precedent for U.S. courts to systematically examine the nature of NFTs and brand liability, profoundly impacting the compliance boundaries for traditional enterprises in the Web3 industry.

What is a "Soft Rug"?

Experienced crypto lawyer, former law school professor, and author of "The DeFi Defender" newsletter, Carlo D’Angelo, states that the key distinction in such cases is that a "soft rug pull" is not a violent sell-off but rather a gradual deviation—often with subjective intent or gross negligence—by the project team from the originally intended roadmap, causing NFTs that once had potential to gradually lose value.

The plaintiffs (NFT holders) will argue that Nike's brand promotion led users to reasonably expect the project would continue to develop, and when Nike ultimately shut down RTFKT, it resulted in actual losses.

Nike may argue:

• The NFTs from Nike RTFKT are "collectibles" rather than securities;
• The company has no legal obligation to indefinitely operate a commercially unsustainable project.

Does it Involve "Unregistered Securities"?

According to the current U.S. securities law determination standard (the "Howey Test"), the court will assess whether RTFKT NFTs were sold as an "investment contract."

Carlo D’Angelo points out that although the U.S. Securities and Exchange Commission (SEC) is currently leaning towards a more lenient stance on crypto policy (especially in the context of Trump's return), the court will independently judge based on previous related cases rather than following the SEC's viewpoint.

This means that it will be quite challenging for the plaintiffs to prove that these NFTs are securities.

Did Nike Mislead Consumers?

This case does not solely rely on "securities law" litigation logic; the plaintiff's team has also adopted a "dual-path" strategy:

• On one hand, accusing Nike of insufficient disclosure when promoting the NFTs;
• On the other hand, invoking consumer protection laws from states like New York and California, accusing Nike of failing to deliver on its promised "future usability and ongoing support."

This strategy may succeed in claims related to consumer protection, even if it cannot win on "securities designation."

Did RTFKT's Closure Become Key Evidence?

To some extent, yes. The formal closure of the RTFKT brand is viewed by the plaintiffs as a key fact indicating Nike's abandonment of the project and breach of its promotional commitments. NFT holders believe that their purchase of these digital assets was based on a "reasonable expectation" that Nike would continue to invest resources and support the ecosystem.

How Will the Case Outcome Affect the Entire Web3 World?

Carlo D’Angelo predicts that the court may dismiss "securities claims," but it does not rule out the possibility that the plaintiffs could achieve partial victory on "consumer rights" grounds.

Regardless of the outcome, this case serves as a warning to brands:

• If the plaintiffs win, corporate behavior in the Web3 world will be scrutinized more strictly;
• Companies may need to avoid making promises of "ongoing support" and "future features" that are difficult to fulfill long-term when launching NFTs;
• It could even lead to a decrease in brands' overall willingness to invest in NFTs.

Conclusion

Nike's RTFKT NFT case is not just an ordinary legal dispute; it will bring the following three profound impacts to the Web3 world:

1. Judicial determination of whether NFTs constitute securities;
2. Whether traditional brands need to be long-term responsible for digital assets;
3. How companies can balance innovation and legal risks in Web3.

In the future, perhaps every "mint now, roadmap later" NFT project will face more possibilities of accountability.

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