ASA rules on Arsenal’s crypto ads

What steps must be taken when advertising cryptoassets to avoid taking advantage of inexperienced consumers and to ensure that the published information is not misleading?

The key takeaway

In a high profile ruling against Arsenal Football Club, the Advertising Standard Authority (ASA) has reminded promoters of cryptoassets that their advertising should include sufficient detail about the product on offer and the risks attaching to making an investment.

The background

In August 2021 Arsenal advertised fan tokens on their Facebook page and website. The tokens were meant to give fans the right to interact with the club via the online platform Socios, by voting on official club decisions. While Arsenal claimed that the tokens did not represent financial instruments, the ads made it clear that consumers needed to buy a certain cryptocurrency first in order to acquire the fan token. The ASA considered whether the ad was for the sale of a cryptoasset and consequently whether the wording took advantage of inexperienced consumers and was misleading.

The development

Arsenal was told that the ads must not appear in their current form again. In its assessment of the case the ASA considered the following points:

• whether the ads were irresponsible and taking advantage of consumers’ inexperience or credulity. The ASA also challenged whether the wording of the ads trivialised investment in cryptoassets
• whether the ads failed to illustrate the risk of the investment, and
• whether the ads were misleading because they did not make it sufficiently clear that the fan token was a cryptoasset, which could only be obtained through opening an account and exchanging with another cryptocurrency which also had to be purchased beforehand.

While the Financial Conduct Authority’s guidance provides that utility tokens differ from other unregulated cryptoassets such as Bitcoin, such tokens are still categorised as cryptoassets. This led the ASA to conclude that they could also be used as a form of financial investment. The ASA further found that the need for users to sign up to a Socios account encouraged consumers to make high risk investments and trivialised making serious and potentially costly financial decisions. 

Moreover, it was held that potential tax implications, such as capital gains tax (CGT) on profits from investing in cryptoassets, should have been flagged by the ad, as most consumers were unlikely to be aware that CGT had to be paid on profits exceeding the annual CGT allowance. Failure to make this clear meant that the ad was irresponsible and breached the rules on social responsibility and financial products of the CAP Code. 

The ads also failed to include sufficient information about the fan token and underlying cryptocurrency needed to acquire the token as well as the risks attached to them. Both ads should have made clear that cryptoassets are not regulated within the UK meaning that consumers cannot seek recourse through the Financial Services Compensation Scheme or the Financial Ombudsman Service. Based on this, the ASA deemed the ads misleading as they did not ensure that customers could have made an informed decision to enquire further. 

Why is this important?

With cryptoassets rising in popularity, this decision helps show the level of care which the ASA requires in respect of their advertising.

Any practical tips?

When selling cryptoassets, advertisers should ensure that these types of investments are not trivialised and do not take advantage of consumers’ lack of experience or credulity. The ruling indicates the type of detail required about the material characteristics of the product on offer. It also shows how important it is to flag that: CGT might be payable on profits from an investment; the value of investments in cryptoassets is variable; and that these types of assets are unregulated.