Summary of Council decision:
Three issues were investigated, all of which were Upheld.
A Facebook post and website for Arsenal Football Club:
a. The post on Arsenal’s Facebook page, posted on 12 August 2021, included text that stated “$AFC in now live $CHZ” and “Ben White, Calum Chambers and Kieran Tierney have had their say … But what song do you want to hear when we win? Download the Socios app to get your token and vote”. The ad included a video featuring Ben White, Calum Chambers and Kieran Tierney.
b. The website included a web page published on 6 August 2021 with the title “$AFC Fan Token: Everything you need to know” and included information explaining what the Arsenal Fan Token was and the benefits that it offered. The page included text at the bottom that stated “In order to buy $AFC fan tokens you need to purchase the cryptocurrency Chiliz. Please remember that the future value of Fan Tokens is dependent on supply and demand, and can therefore go up as well as down. Fans should be aware that they could lose some or all of their money invested. We advise you to spend only what you can afford and seek independent financial advice if required.”
The ASA challenged whether:
1. ads (a) and (b) were irresponsible because they took advantage of consumers’ inexperience or credulity and trivialised investment in cryptoassets;
2. ads (a) and (b) were misleading because they failed to illustrate the risk of the investment; and
3. ad (a) was misleading because it did not make clear the “token” was a cryptoasset, which could only be obtained by opening an account and exchanging with another cryptocurrency which had to be purchased.
1. Arsenal Football Club PLC t/a Arsenal said that they partnered with Socios to provide fans with access to a digital platform where they could interact with each other and collect Fan Tokens to influence and engage with club decisions. They said their Fan Engagement Programme was launched on 12 July 2021 when they announced the partnership with Socios and the launch of their Fan Tokens. All the subsequent promotional materials relating to Fan Tokens were designed to raise awareness of the inherent benefits of owning the tokens, and doing so permanently, in terms of offering fans the opportunity to interact with the Club such as the right to vote on official Club decisions, and the Fan Tokens were not promoted as financial products or an investment vehicle and they did not encourage the trading of Fan Tokens and explained that only one Fan Token would be needed to vote on Club decisions. They explained that was supported by the Socios App which had a disclaimer that stated “Fan Tokens do not represent financial instruments or any form of financial product. They are meant to be used for entertainment and fan experience purposes only”.
Arsenal said that Fan Tokens were utility tokens used to encourage fan participation and therefore were materially different to cryptocurrencies which were virtual currencies used as a means of payment. Arsenal explained that the Fan Tokens are not specified investments under the Financial Services and Markets Act 2000. In addition, Arsenal said that when the ads were made available to the Club’s followers, Fan Tokens could not be traded on the Socios app. Any trading facility was not available on the Socios app until six weeks after the publication of ad (b) and five weeks after the publication of ad (a).
Arsenal said that it considered that the Fan Tokens were promoted responsibly by reminding fans they only needed one token to vote in Club decisions, that they should only purchase what they could afford and they had included information on the website that included risk warnings and said “seek independent financial advice if required”.
Arsenal said because the ads did not promote Fan Tokens as cryptocurrency investments or as a way to make money, in their view there was no requirement for them to include information about the potential for capital gains tax to be paid on any profits made on selling the Fan Tokens. They said to include any such messaging could have potentially confused and misled consumers about the nature and purpose of Fan Tokens as promoted by the club.
Arsenal said that even if the ASA disagreed with Arsenal’s view that the ads did not promote Fan Tokens as a form of financial investment, there was no express requirement in the CAP Code, ASA guidance or cryptoasset rulings for advertisers to explain to consumers that Capital Gains Tax (CGT) may be payable on profits from financial investments. They said further to this they could find no ASA decision or guidance note requiring advertisers to provide a warning about CGT for financial investment ads more generally. Arsenal said that it should not be sanctioned for failing to include a warning about CGT when there was no regulatory requirement to include this information.
Arsenal said the requirement to provide a CGT warning in ads relating to an unregulated investment went beyond Financial Conduct Authority (FCA) standards for regulated investments. They explained that the rules in chapter four of the Conduct of Business sourcebook did not require investment firms to warn clients of potential tax implications for regulated investments. They said that requiring the warning in cryptoassets ads would counter-intuitively hold the promotion of unregulated products to stricter standards than is required by the FCA for the promotion of regulated financial products.
2. Arsenal said ad (b) was designed to educate fans about the Fan Engagement Programme, the benefits of owning Fan Tokens, how to redeem Free Tokens and buying additional ones using the cryptocurrency Chiliz. Because the purchase of Fan Tokens involved first buying the cryptocurrency Chiliz they included a warning in ad (b) making it clear that fans may not be able to get their money back because once purchased the value of Fan Tokens could go down as well as up and the warning included the recommendation that fans should seek independent financial advice if required. Arsenal said that they urged fans to only purchase what they could afford and reminded fans that they only needed to own one Fan Token to vote in polls and participate in competitions so as to discourage over-spending. They said that while they did not promote the Fan Tokens as tradable or that they could be used for capital gain, and so in their view there was no requirement to include a warning, they believed the warning in ad (b) was the responsible thing to do. They said the warning was in the body of the article and was transparent to consumers.
Arsenal said ad (a) was posted one week after ad (b). They believed therefore that fans would already be aware from ad (b) how Fan Tokens worked and could be purchased. The purpose of ad (a) was to highlight how Fan Tokens could be used to influence club decisions, which in that particular case meant picking what song would be sung when a goal was scored. They said the ad neither promoted the Fan Token as an investment for capital gain nor encouraged the trading of cryptocurrency. In addition the purchase of Chiliz was not promoted as an investment or for its financial value.
Arsenal said that neither post referred to the past performance of cryptocurrency nor implied money could be made from Fan Tokens. Therefore, because they were not ads for cryptocurrency investments, in their view there was no requirement to include a warning. However, they believed the warning they included in ad (b) was the responsible thing to do.
3. Arsenal believed that Fan Tokens and their relationship with cryptocurrency was widely understood by the target audience, as followers of the Arsenal Facebook page. Ad (a) was one of a series of promotional posts about the Fan Engagement Programme, which they said made it clear that, with the exception of the free non-tradable Fan Tokens gifted to members, all Fan Tokens had to be purchased by buying the cryptocurrency, Chiliz. In addition they said that the Socios app itself was clear that the purchase of Fan Tokens could only be made by buying Chiliz currency.
Arsenal believed Socios was well known in the footballing community as a cryptocurrency platform because they sponsored and partnered with a number of European football clubs. They therefore believed, in conjunction with the wider public information about Fan Tokens and Socios, and the information provided in ad (b), ad (a) was clear and viewers of the post would understand that Fan Tokens had to be bought with cryptocurrency.
Guidance published by the FCA stated that utility tokens could be redeemed for access to a specific product or service and therefore differed from other unregulated cryptoassets such as Bitcoin, which were primarily used as a means of exchange. However, they were nevertheless categorised by the FCA as cryptoassets, as were cryptocurrencies, and as such the ASA considered they could be used as a form of investment, regardless of how they were promoted. In addition while we noted Arsenal’s comment that the trading facility for Socios was not available when the ads were published, thereby preventing consumers trading Fan Tokens for six weeks, the ads had continued to remain live, when trading on Socios was available and had been for a number of months.
We understood that cryptoassets were a complex and sophisticated investment, subject to frequent change in value and one that could potentially lead to large losses. We considered the decision to open a cryptoasset exchange account, with the potential to engage with and invest in such a financial product, was one that required careful thought and consideration. We noted that Arsenal members would receive one free Fan Token. However, to use this token a consumer had to sign up for the Socios account and this would give users the potential to buy and trade more tokens in the future.
We acknowledged that ad (b), but not ad (a), had stated that consumers only needed one token to vote in Club decisions, that consumers should only buy what they could afford and to seek independent financial advice if needed. Nonetheless, we considered the advertising of the Fan Token as a way to influence the song played when Arsenal won a match. The promotion of free Fan Tokens, which still needed the user to sign up to a Socios account, to sell a cryptoasset product or sign up for a cryptoasset service, encouraged consumers to engage in such a high risk investment without consideration and trivialised what was a serious and potentially costly financial decision.
We noted Arsenal’s comments that there was no current regulatory basis to include information in ads that consumers could become liable for a CGT charge as a result of investment gains in cryptoassets or any regulated investments. We considered, however, that the cryptoasset product offered by Arsenal in the ad was not regulated by the FCA and therefore not subject to the FCA’s financial promotions rules. We also considered that consumers would be less likely to be familiar with cryptocurrencies than with other well-established regulated investments such as ISAs or shares. Therefore, most consumers were unlikely to be aware that CGT had to be paid on profits in excess of the annual CGT allowance from investing in cryptoassets, in the same way they would for more traditional investments.
We acknowledged that the ads did not promote the Fan Tokens as an investment or financial product. However, the product was a cryptoasset regardless of how it was promoted and the ads did not contain any information that CGT could be payable on profits from investing in cryptoassets. We therefore considered the potential tax implications were not made sufficiently clear to consumers considering investing in it.
Therefore, because the ads trivialised investment in cryptoassets and took advantage of consumers’ inexperience or credulity by not making clear that CGT could be payable on profits from investing, we concluded the ads were irresponsible and breached the Code.
On that point, the ads breached CAP Code (Edition 12) rules 1.3 (Social responsibility), and 14.1 (Financial products).
The CAP Code required that marketing communications for investments made clear that the value of investments was variable and, unless guaranteed, could go down as well as up, and also that significant limitations and qualifications were stated and presented clearly. We understood that Fan Tokens were a cryptoasset and could be used as an investment, even if not marketed as a product that could generate a return. We considered that cryptoassets were a volatile investment, subject to frequent change and one that could potentially lead to large losses.
The ads appeared on the Arsenal website and Facebook page and were therefore likely to have been seen by a general audience including consumers who did not have financial knowledge and experience of cryptoassets. We considered consumers would expect that the exchange of cryptoassets would be regulated, with legal protection in place for investment activities. We understood, however, that cryptoasset services in general were not regulated within the UK, and therefore consumers could not seek recourse to services such as the Financial Services Compensation Scheme or the Financial Ombudsman Service.We acknowledged that ad (a) was posted a week after ad (b), which contained some information about Chiliz being a cryptocurrency and the risks involved. However, there was no guarantee that Facebook users had previously engaged with ab (b), and ad (a) itself had no warning about the risks of cryptoassets.
We further acknowledged that ad (b) included text which indicated that the value of Fan Tokens could go down and that consumers could lose some or all of the money they invested. However, that risk warning was at the bottom of ad (b) and we considered it was possible for consumers to engage further without seeing it. In addition we noted the warning did not make consumers aware that cryptoassets were unregulated in the UK.
Therefore, because ad (a) did not include any risk warning making consumers aware that cryptoassets were unregulated in the UK and cryptoassets could go down as well as up. Also, because the risk warning in ad (b) was not prominent and did not state cryptoassets were unregulated in the UK, we concluded the ads were misleading.
On that point, the ads breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
Ad (a) only referred to the Fan Token as a “token”, included no risk warning about cryptoassets and did not mention that Fan Tokens were a cryptoasset or that to buy them you had to first purchase another cryptocurrency, Chiliz. We therefore considered consumers were unlikely to understand that the ad referred to cryptoassets.We acknowledged that the Socios app explained that to purchase Fan Tokens it was necessary to buy the cryptocurrency Chiliz. However, while the ad linked to the Socios log-in page, this had no immediate information about cryptoassets.
We considered that Fan Tokens were a cryptoasset which had to be bought by purchasing another cryptocurrency and that would be material information that consumers needed to make an informed decision to enquire further. Because ad (a) did not include material information that Fan Tokens were a cryptoasset that had to be exchanged with another cryptocurrency, we concluded the ad was misleading.
On that point, ad (a) breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification).
The ads must not appear again in the form complained about. We told Arsenal Football Club PLC to ensure that their future ads did not trivialise investment in cryptoassets and did not irresponsibly take advantage of consumers’ lack of experience or credulity by not making clear that CGT could be due on cryptoasset profits. We told them to ensure that they made sufficiently clear that the value of investments in cryptoassets was variable and cryptoassets were unregulated. We also told them to ensure that they did not mislead consumers by omitting material information in their ads, including that Fan Tokens were a cryptoasset that had to be bought using another cryptocurrency.