Comprehensive Examination of Nike’s RTFKT Lawsuit: Implications for the Web3 Landscape Following “Soft Running Away” Accusations

This case could establish a significant precedent in which the U.S. court will meticulously evaluate both the nature of NFTs and brand responsibilities for the first time. It promises to profoundly influence the compliance thresholds of traditional companies within the Web3 sector.

By Matt Medved

Editor/far

Compiled by Centreless X

RTFKT (pronounced “artifact”) is a digital fashion and technology company acquired by Nike in 2021. During this period, it introduced NFT digital and physical sneakers featuring the iconic Swoosh logo. On December 3, 2024, the company announced its plans to shut down. On the closure day, it stated on the X platform (formerly Twitter), “Today we announced plans to gradually cease RTFKT’s operations. Reflecting on our journey, we are immensely proud of what we’ve accomplished together.”

Since entering the NFT arena in 2021 with $10,000 in sneaker sales on the Nifty Gateway platform, RTFKT has developed a robust Ethereum-based NFT and physical collectibles ecosystem, collaborating with renowned artists such as Takashi Murakami.

Following its closure at the end of 2024, Nike faces a $5 million class action lawsuit. The plaintiffs, holders of the RTFKT NFTs it acquired, assert that Nike leveraged its brand influence and long-term vision to hype the RTFKT NFTs, only to eventually “quietly abandon” the project, constituting what is considered a “soft rug pull.”

This lawsuit has emerged as one of the most scrutinized legal conflicts in the crypto landscape and could signify a pivotal moment where a U.S. court examines NFTs and brand responsibility, thereby reshaping compliance standards for conventional companies in the Web3 ecosystem.

What is a “soft rug”?

According to Carlo D’Angelo, a seasoned crypto attorney, former law school professor, and author of the newsletter “The DeFi Defender,” the critical distinction in such cases is that a “soft rug pull” is characterized not by a sudden sell-off, but rather by a gradual deviation—whether intentional or due to gross negligence—from the original project roadmap, leading to a diminishing value of the NFTs previously held in high regard.

The plaintiffs (NFT holders) will contend that Nike’s branding instilled a reasonable expectation that the project would progress, and when Nike opted to shut down RTFKT, it was a financial loss for them.

Nike might counter that:

• RTFKT’s NFTs are “collectibles,” not securities;
• The company has no legal obligation to prolong a commercially unviable project indefinitely.

Are there “unregistered securities” involved?

Under current U.S. securities law (i.e., the “Howey Test”), the court will evaluate whether the RTFKT NFTs were marketed as an “investment contract.”

Carlo D’Angelo notes that while the U.S. Securities and Exchange Commission (SEC) may exhibit a more lenient approach to crypto regulations (especially amid Trump’s potential return), courts will base their decisions on prior case law rather than solely relying on the SEC’s stance.

This indicates that plaintiffs may struggle to substantiate claims that these NFTs are indeed securities.

Did Nike mislead consumers?

This case hinges not just on securities litigation logic. The plaintiffs have deployed a “dual path” strategy:

• Firstly, accusing Nike of insufficient disclosure during the NFT promotion;
• Secondly, invoking consumer protection laws in states like New York and California, charging Nike with failing to fulfill its promises regarding “future availability and continued support.”

Even if this strategy does not yield “security certification,” it may still result in a successful claim at the consumer protection level.

Is RTFKT’s shutdown a pivotal piece of evidence?

To some extent, yes. The official shutdown of the RTFKT brand is seen by the plaintiffs as crucial evidence that Nike abandoned the project, thereby violating its promotional commitments. NFT holders maintain that their purchases were made under the “reasonable expectation” that Nike would continue investing resources to support the ecosystem.

How might the case’s outcome influence the broader Web3 landscape?

Carlo D’Angelo anticipates that while the court may dismiss the “securities claims,” there remains a possibility that plaintiffs could secure a partial victory in consumer rights.

Regardless of the ruling, this case stands as a cautionary tale for brands:

• If the plaintiffs prevail, company practices in the Web3 realm will face tighter scrutiny;
• Future NFT launches may need to avoid making potentially unfulfillable promises regarding “continued support” and “future features”;
• This may lead to a decline in brands’ overall investment willingness in NFTs.

Conclusion

The RTFKT case involving Nike transcends a typical legal dispute. It is poised to affect the Web3 landscape in several significant ways:

• Clarifying judicial definitions of NFTs as securities;
• Determining if traditional brands bear long-term responsibility for digital assets;
• How companies can balance innovation with legal risks in the Web3 space.

In the future, it’s likely that any NFT project practicing “mint now, roadmap later” will face a greater likelihood of accountability.

Author: Centreless

This article presents the views of a PANews columnist and does not reflect PANews’s official position. PANews does not accept legal liability. The content and opinions do not constitute investment advice.

Image Source: Centreless. If there are any infringements, please reach out to the author for removal.

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