Nike is facing a lawsuit from crypto investors who allege the apparel giant executed a "rug pull" following the abrupt closure of its metaverse project, RTFKT Studios, in December. The plaintiffs are asking for more than $5 million in damages. They point to consumer protection law violations in New York, California, Florida, and Oregon.
Nike also purchased RTFKT Studios, a collectibles company famous for its sneaker designs and digital collectibles that went viral on social media in 2021. The acquisition signaled Nike's entry into the metaverse, with RTFKT positioned as a key player in the company's Web3 strategy. So when TikTok recently pulled the plug on the RTFKT project, a storm of controversy and legal action was unleashed.
The lawsuit claims that Nike purposefully misled investors and was unable to follow through with what they had planned and announced about the metaverse project. Plaintiffs claim that Nike’s actions constitute a “rug pull.” This crypto term, often cited as one of the dangers of the crypto world, describes a project that suddenly leaves its investors high and dry with worthless assets. The lawsuit highlights the greater public attention being paid to corporate activities in the metaverse. Second, it serves to highlight the risks associated with digital assets.
New York, California, Florida and Oregon investors claim Nike committed consumer protection law violations under the laws of those states. Further, they claim that Nike’s marketing and promotion of RTFKT Studios incorrectly raised the expectation that RTFKT Studios would receive ongoing support and development. Those expectations were deeply misplaced. The plaintiffs are asking to be compensated for losses sustained by the project’s shutdown.
The Center’s lawsuit raises significant questions about the degree of responsibility companies should have for behavior that occurs in the metaverse. With increased interest among brands testing the waters in Web3, it’s important for them to stay mindful of the legal and ethical issues that arise from their movements. The future implications of this case could have lingering effects if/when metaverse projects and other digital asset-related disputes make their way to litigation.
