The world’s largest sportswear brand, Nike, was sued on Friday with a $5 million proposed class action, accusing the company of abandoning NFT investors by abruptly shutting down its RTFKT subsidiary and abandoning its sneaker-themed digital assets.

In a lawsuit filed Friday in the Eastern District of New York, the plaintiffs allege that Nike used its iconic brand to hype digital collectibles tied to its digital fashion and technology company RTFKT, then executed a "soft rug pull," leaving investors with devalued and illiquid NFTs.

The complaint also accuses Nike of promoting unregistered securities in violation of U.S. law, enticing buyers with “marketing prowess” to “hype, promote, and prop up” sneaker-themed NFTs, only to withdraw support once profits were made.

The lawsuit comes as regulators reconsider how NFTs should be treated under U.S. securities laws. Just last month, SEC Crypto Task Force lead Hester Peirce suggested that certain NFT projects could soon be formally exempted from securities classification.

In any case, plaintiffs, led by Jagdeep Cheema, claim they "would never have purchased the Nike NFTs at the prices they did, or at all," had they known the tokens were unregistered securities or that Nike would abandon the project. 

“The Nike NFTs were never registered as such,” the complaint said, alleging Nike deprived investors of material disclosures that registration would have required.

"One does not expect it from Nike," the complaint reads, "the international sports juggernaut with yearly revenue of around $50 billion. But that is what Nike did.”

Nike has not immediately responded to Decrypt’s request for comments.

In December 2024, RTFKT abruptly announced via social media that it was “winding down” operations, sending secondary market prices for Nike NFTs plunging, prices that have yet to recover.

Even if the NFTs are not considered securities, the lawsuit alleges, Nike’s "deceptive acts”-building an ecosystem of rewards to boost NFT demand and then pulling support - violated consumer protection laws in New York, California, Florida, and Oregon.

They also claim “unjust enrichment,” noting how Nike profited from primary and secondary NFT sales while leaving retail investors to bear the losses.

Meanwhile, last week, RTFKT’s NFTs, including its flagship Clone X collection co-created with artist Takashi Murakami, briefly disappeared from display due to a Cloudflare hosting issue. 

Images stored off-chain were replaced by a black screen displaying “This content has been restricted” after Cloudflare prematurely downgraded RTFKT's account to a free tier, according to RTFKT’s head of technology, Samuel Cardillo.

Edited by Sebastian Sinclair