Legal Controversy Arises from the Shutdown of Nike's RTFKT Project, Which May Impact the Development of the Web3 Industry

RTFKT is a company focused on digital fashion and technology, acquired by a well-known sports brand in 2021. The company previously launched NFT digital and physical sneakers featuring its iconic logo, but announced on December 3, 2024, that it would gradually cease operations.

Since entering the NFT market in 2021 by selling a pair of sneakers worth $10,000 on a certain NFT platform, RTFKT has quickly established an Ethereum-based ecosystem of NFTs and physical collectibles, collaborating with several well-known artists.

However, with the shutdown of RTFKT, its parent company is facing a class action lawsuit worth $5 million. The plaintiffs are holders of RTFKT NFTs, who claim that the parent company used its brand influence and long-term vision to hype up RTFKT NFTs, only to "quietly abandon" the project in the end, constituting what is referred to as a "soft rug pull."

This lawsuit has become one of the most closely watched legal battles in the crypto world and could serve as an important precedent for U.S. courts to systematically examine the nature of NFTs and brand liability, having a profound impact on the compliance boundaries for traditional enterprises in the Web3 sector.

Definition of "soft rug"

Experienced crypto lawyer Carlo D'Angelo explains that a "soft rug pull" is not a violent sell-off, but rather a gradual deviation by the project team from the original development roadmap, with subjective intent or significant negligence, causing NFTs that originally had potential to gradually lose value.

The plaintiff (NFT holder) claims that the brand promotion by the parent company had led users to reasonably expect that the project would continue to develop, and when RTFKT was ultimately shut down, it actually caused losses.

The defendant may argue:

• RTFKT's NFTs are "collectibles" and not securities;
• The company has no legal obligation to operate a commercially unsustainable project indefinitely.

Do NFTs constitute unregistered securities?

The court will determine whether RTFKT NFTs are sold as an "investment contract" based on the current U.S. securities law "Howey test" standard.

Carlo D'Angelo pointed out that although the SEC is currently leaning towards a more lenient stance on crypto policy, the court will make independent judgments based on previous related cases rather than following the SEC's views.

This means that it is not easy for the plaintiff to prove that these NFTs belong to securities.

Are consumers being misled?

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

• Accusation that the parent company did not provide sufficient disclosure when promoting NFTs;
• Citing the consumer protection laws of relevant states, accusing the parent company of failing to fulfill its promise of "future availability and ongoing support."

This strategy may still succeed in claims from a consumer protection perspective, even if it cannot win "securities recognition."

The Impact of RTFKT Shutdown

The official shutdown of the RTFKT brand is seen by the plaintiffs as a key fact that the parent company 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 the parent company would continue to invest resources and support the ecosystem.

Impact on the Web3 World

Carlo D'Angelo predicts that 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 parties:

• If the plaintiff wins the case, the actions of the enterprise in the Web3 world will be scrutinized more strictly;
• When companies launch NFTs in the future, they should avoid making promises that are difficult to fulfill in the long term, such as "ongoing support" and "future features".
• It may even lead to a decline in the brand's overall willingness to invest in NFTs.

Conclusion

This lawsuit is not just an ordinary legal dispute; it will bring the following three profound impacts to the Web3 world:

1. The judicial definition of whether NFTs constitute securities;
2. Should traditional brands 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 more accountability risks.