In-depth interpretation of Nike's RTFKT lawsuit: After being accused of "soft rug pull", what impact does it have on the Web3 world?

Author /Matt Medved

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Compile / Centreless X

RTFKT (pronounced "artifact") is a digital fashion and technology company that was acquired by Nike in 2021. During this time, it launched NFT digital and physical sneakers featuring the iconic Swoosh design. On December 3, 2024, it announced that it would be shutting down. 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've made together."

Since 2021, RTFKT has quickly established a large Ethereum-based NFT and physical collectibles ecosystem by selling sneakers worth $10,000 on the Nifty Gateway platform, collaborating with artists such as Takashi Murakami during this time.

After closing at the end of 2024, sportswear giant Nike is facing a $5 million class-action lawsuit. The plaintiffs are holders of the NFT brand RTFKT, which Nike acquired. They claim that Nike used 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 also become an important precedent for U.S. courts to systematically examine the nature of NFTs and brand liability, profoundly impacting the compliance boundaries of 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 stated that the key distinction in such cases is that a "soft rug pull" is not a violent sell-off, but rather a gradual—though subjectively intended or significantly negligent—deviation by the project team from the original development roadmap, causing NFTs that once had potential to gradually lose value.

The plaintiff (NFT holder) will argue that Nike's brand promotion had led users to reasonably expect that the project would continue to develop, and when Nike ultimately shut down RTFKT, it actually caused losses.

Nike may argue that:

• Nike RTFKT's NFT is a "collectible" and not a security;
• The company has no legal obligation to operate a commercially unsustainable project indefinitely.

Does ### involve "unregistered securities"?

According to the current standards set by U.S. securities law (i.e., the "Howey Test"), the court will determine whether RTFKT NFT is sold as an "investment contract."

Carlo D’Angelo pointed 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 make judgments based on previous relevant cases, rather than adhering to the views of the SEC.

This means that the plaintiff faces significant difficulty in proving that these NFTs are securities.

Did Nike mislead consumers?

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

• On one hand, it accuses Nike of not providing adequate disclosure while promoting NFTs;
• On the other hand, citing consumer protection laws in states such as New York and California, it accuses Nike of failing to deliver on its promise of "future availability and ongoing support."

This strategy may succeed in claims from the consumer protection aspect even if it cannot win the "securities identification."

Is the shutdown of RTFKT key evidence?

To some extent, yes. The official shutdown of the RTFKT brand is viewed by the plaintiffs as a key fact that Nike has abandoned the project and violated its promotion. NFT holders believe that the reason they purchased these digital assets is based on a "reasonable expectation" that Nike would continue to invest resources and support this ecosystem.

How will the case outcome affect the entire Web3 world?

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

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

• If the plaintiff wins, the behavior of enterprises in the Web3 world will be scrutinized more strictly;
• When companies launch NFTs in the future, they may need to avoid making promises like "ongoing support" and "future features" that are difficult to fulfill in the long term;
• This may even lead to a decline in the overall willingness of the brand to invest in NFTs.

Summary

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

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

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