In-Depth Analysis of the Nike RTFKT Litigation: What Impact Will the Alleged "Soft Rug Pull" Have on the Web3 World?

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

Since entering the NFT market in 2021, RTFKT quickly established a vast ecosystem of Ethereum-based NFTs and physical collectibles, selling sneakers worth $10,000 on the Nifty Gateway platform. It also collaborated with renowned artists such as Takashi Murakami.

After its closure at the end of 2024, the sports giant Nike faced a $5 million class-action lawsuit. The plaintiffs, holders of the NFT brand RTFKT acquired by Nike, claimed that Nike had hyped up RTFKT NFTs using its brand influence and long-term vision but ultimately "quietly abandoned" the project, constituting what they called a "soft rug pull."

This lawsuit has become one of the most closely watched legal battles in the crypto world and may set an important precedent for the U.S. courts to systematically examine the nature of NFTs and brand liability, profoundly influencing the compliance boundaries for traditional companies in the Web3 industry.

What Is a "Soft Rug Pull"?

Carlo D’Angelo, an experienced crypto lawyer, former law school professor, and author of the newsletter The DeFi Defender, says the key distinction in this case is that a "soft rug pull" is not a violent sell-off but rather a gradual—yet intentional or negligently significant—deviation from the original roadmap by the project team, causing NFTs that once had potential value to gradually lose their worth.

The plaintiffs (NFT holders) will argue that Nike's brand promotion had led users to reasonably expect the project to continue developing. When Nike ultimately shut down RTFKT, it caused actual losses.

Nike, on the other hand, is likely to argue that:

Nike RTFKT's NFTs are "collectibles" rather than securities;

The company has no legal obligation to indefinitely operate a commercially unsustainable project.

Is It an "Unregistered Security"?

According to the current U.S. securities law determination standard (the "Howey Test"), the court will determine 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 trending towards a more relaxed stance on crypto policies (especially under the backdrop of Trump's return), the court will make an independent judgment based on previous relevant cases rather than following the SEC's views.

This means that it will not be easy for the plaintiffs to prove that these NFTs are securities.

Did Nike Mislead Consumers?

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

On one hand, they accuse Nike of failing to make adequate disclosures when promoting the NFTs;

On the other hand, they cite consumer protection laws in states such as New York and California, accusing Nike of not fulfilling its promised "future availability and ongoing support."

Even if they cannot win the "securities determination," this strategy may still succeed in claiming compensation through consumer protection.

Is the Shutdown of RTFKT a Key Piece of Evidence?

To some extent, yes. The official shutdown of the RTFKT brand is seen by the plaintiffs as the key fact that Nike abandoned the project and violated its promotions. NFT holders believe that their purchase of these digital assets was based on the "reasonable expectation" that Nike would continue to invest resources and support the ecosystem.

How Will the Outcome of the Case Impact the Entire Web3 World?

Carlo D’Angelo predicts that the court may dismiss the "securities claims," but it is not impossible for the plaintiffs to achieve partial victory on the "consumer rights" front.

No matter the outcome, this case serves as a warning to brands:

If the plaintiffs win, corporate behavior in the Web3 world will be subject to stricter scrutiny;

Companies may need to avoid making promises of "ongoing support" and "future functionality" that are difficult to fulfill in the long term when launching NFTs in the future;

It could even lead to a decreased willingness of brands to invest in NFTs overall.

Summary

Nike's RTFKT NFT case is not just an ordinary legal dispute. It will have the following three profound impacts on the Web3 world:

• Judicial determination of whether NFTs constitute securities;

• Whether traditional brands are required to be responsible for digital assets in the long term;

• How companies can balance innovation with legal risks in Web3.

In the future, perhaps every NFT project that follows the "mint now, roadmap later" approach will face greater possibilities of accountability.