Nike vs. RTFKT Dispute: An Important Legal Precedent in the Web3 Space

In December 2024, sportswear giant Nike found itself embroiled in a class-action lawsuit valued at $5 million. The plaintiffs are holders of the NFT brand RTFKT, which Nike had previously acquired. They accuse Nike of leveraging its brand influence and long-term vision to hype up the RTFKT NFTs, only to ultimately abandon the project, constituting what is referred to as a "soft carpet pull."

RTFKT is a digital fashion and technology company that was acquired by Nike in 2021. During its operation, the company launched NFT digital and physical sneakers featuring the iconic Swoosh design. However, on December 3, 2024, RTFKT announced that it would gradually cease operations, leading to this legal dispute.

This lawsuit has become one of the most closely watched legal battles in the crypto world and could serve as an important precedent for the first systematic examination of the nature of NFTs and brand liability by U.S. courts, having far-reaching implications for the compliance boundaries of traditional enterprises in the Web3 industry.

Definition and Controversy of "Soft Rug"

"Soft rug pull" is not a violent sell-off, but rather a gradual yet intentional or significant deviation by the project team from the original development roadmap, causing NFTs that initially had potential to gradually lose value.

In this case, the plaintiff (NFT holder) claims that Nike's brand promotion led users to reasonably expect that the project would continue to develop, while Nike's eventual shutdown of RTFKT caused actual losses.

Nike's possible defense strategies include:

1. Claims that Nike RTFKT's NFTs are "collectibles" rather than securities;
2. Emphasize that the company has no legal obligation to indefinitely operate a commercially unsustainable project.

Do NFTs constitute unregistered securities?

The court will determine whether RTFKT NFTs are sold as an "investment contract" based on the "Howey test" standard of U.S. securities law. Although the SEC is currently relatively lenient on crypto policy, the court will make an independent judgment based on previous relevant cases, rather than fully adhering to the SEC's views.

This means that the plaintiff may face considerable challenges in proving that these NFTs are securities.

Applicability of Consumer Protection Law

The plaintiff team adopted a "dual-path" strategy:

1. Accuse Nike of not adequately disclosing information when promoting NFTs;
2. Citing consumer protection laws in states like New York and California, accusing Nike of failing to fulfill its promise of "future availability and ongoing support."

Even if it is impossible to win the "securities designation", this strategy may still obtain compensation through consumer protection.

The Impact of RTFKT Shutdown

The official shutdown of the RTFKT brand is viewed by the plaintiffs as key evidence that Nike has abandoned the project and violated 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 this ecosystem.

Potential Impact on the Web3 World

Legal experts predict that the court may reject "securities claims", but do not rule out the possibility of the plaintiffs achieving partial victory on the "consumer rights" front.

Regardless of the outcome, this case will serve as a warning to the brand party:

• If the plaintiff wins, the company's actions in the Web3 field will be subject to stricter scrutiny;
• When enterprises launch NFTs in the future, they may need to avoid making commitments that are difficult to fulfill in the long term, such as "ongoing support" and "future features";
• This may lead to a decrease in the overall willingness of brands to invest in NFTs.

Conclusion

Nike's RTFKT NFT case is not just an ordinary legal dispute; it will have a profound impact on three aspects of the Web3 world:

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

In the future, every "issue first, plan later" NFT project may face a greater possibility of accountability. The outcome of this case will provide important references for the legal framework and boundaries of corporate responsibility in the Web3 field.