Nike is defending itself in a high-profile lawsuit in New York. Now the shutdown of its RTFKT platform has resulted in massive rug pulls for holders of their Non-Fungible Tokens (NFTs). On April 25, this new lawsuit was filed in New York’s Eastern District court. It claims that consumer protection laws were violated in New York, California, Florida and Oregon.
Jagdeep Cheema, the plaintiff, is seeking damages on behalf of a proposed class action. Among other things, he says their group suffered “catastrophic damages” after Nike shut down the platform, causing the value of associated NFTs to plummet.
When these digital assets made their initial drop on April 18, 2022, they sold for a mean value of three.5 Ether. In today’s dollars, this was the equivalent of nearly $8,000. By April 21, 2025, that value had plummeted to less than 0.009 Ether or about $16. This decrease means an incredible 99.8% decrease in total value.
The suit sketches a picture of the NFT market’s spectacular crash and disintegration. Total sales tanked in the first quarter of 2025, down 63% year-over-year to just $1.5 billion vs. $4.1 billion in first quarter of 2024. This decline is indicative of the larger cooling happening in the digital collectibles market.
"prices plunged and did not recover" - The lawsuit
This action not only raises the stakes — it directly confronts the legal nuances of NFTs. …which is significant because no US court has ever clearly decided whether NFTs are securities. The lawsuit contends that a determination of the legal status of NFTs is not necessarily required to address the complaints outlined in the case.
The core of the plaintiff's argument is centered on the claim that Nike's actions led to substantial financial harm for NFT holders. The plaintiff in the lawsuit alleges that the RTFKT platform shutdown was the main driver for the collapse in value.
According to legal I.P. experts, the industry’s fate could hinge on Nike’s warnings that investing in digital assets involves certain risks. They will review whether Nike’s practices comported with industry standards and legal requirements.
This lawsuit has the potential to be extremely damaging to the NFT market. It could help create key precedents regarding companies’ treatment and disclosure of the risks associated with digital assets. Further, it is likely to shape the way consumer protection laws are enforced against the rapidly redeveloping landscape of digital collectibles.
