Background
On 8 October 2023, the FCA took over the regulation of ads for ‘qualifying cryptoassets’ – cryptoassets that are transferable and fungible. The rules apply to all firms’ marketing, qualifying cryptoassets to UK consumers, regardless of which country they are based in, or the technology used. However, cryptoassets as a product remain unregulated. The new rules do not cover cryptoassets that are non-fungible, such as the Non-Fungible Tokens (NFTs) seen in this ad, or Limited Payment Tokens that can only be redeemed with the issuer and used for the payments of specific goods and services, such as non-monetary customer loyalty points.
Summary of Council decision:
Four issues were investigated, all of which were Upheld.
Ad description
A tweet from the Essex County Cricket club Twitter/X account which promoted NFTs for FanCraze Technologies, posted on 30 May 2023, stated “Unveiling a new way of fandom with @OxFanCraze! Supporters can now collect, trade and play cricket strategy games with licensed player cards of their favourites to win cash rewards & never seen before fan experiences!” A link to the FanCraze website was included in the post. The post also included an image of cricketers. Text on the image stated “Essex is taking fandom to the next level!” and “www.fancraze.com”.
Issue
The ASA challenged whether the ad:
1. was obviously identifiable as a marketing communication; and
2. did not make clear which cryptowallet a prospective buyer would need in order to receive a token, and which blockchain the tokens operated on, and was therefore misleading.
One complainant challenged whether the ad was misleading because:
3. it did not make clear that it was referring to an investment product or that gas fees applied; and
4. it failed to illustrate the risk of the investment.
Response
1. Essex County Cricket Club said they had a partnership with FanCraze in which they promoted their digital collectibles (NFTs). They acknowledged the tweet was advertising and apologised for failing to disclose it as such, as required by the CAP Code. They confirmed they had deleted the post in question and stated they would ensure all future ads complied with the Code. FanCraze Technologies Inc. also confirmed they had a commercial relationship with Essex County Cricket Club and acknowledged the tweet should have been correctly labelled as advertising. They stated they would conduct comprehensive training sessions for their staff and partners involved in advertising and social media activities.
Essex County Cricket Club were not required to respond to issues 2, 3 and 4.
2. FanCraze Technologies Inc. (FanCraze) said consumers could only use credit cards, debit cards and bank transfers to purchase NFTs on the FanCraze platform and that transactions took place in US Dollars. They stated that cryptocurrencies, tokens, stablecoins and all other digital assets were prohibited on the FanCraze platform. FanCraze said that cryptowallets were not needed to access the NFTs. FanCraze confirmed that the NFTs on its platform were stored on the Flow Blockchain and users could only trade their tokens with other users on the FanCraze peer-to-peer marketplace platform and not outside of the service.
3. FanCraze said they did not believe their product qualified as an investment product. They said they partnered with sports organisations including the International Cricket Council, the Asian Cricket Council, County Cricket Clubs and the Indian Premier League to license the usage of intellectual property rights owned by these organisations. FanCraze stated they used these licensed rights to create NFTs that existed on the Flow Blockchain, a public blockchain network, which they said was also used by other prominent sports leagues. They said the NFTs could only be accessed by consumers and sold or traded through FanCraze’s peer-to-peer marketplace platform and they could be used to play cricket-based video games online. They also said users could win free collectibles on the platform.
4. FanCraze explained that the accepted payment methods for users to add funds to their accounts were credit cards, debit cards and bank transfers only. However, they acknowledged the value of the NFTs on the FanCraze platform could fluctuate based on the stardom, demand and on-field performances of the players they were associated with. They stated all future marketing communications in the UK would therefore include a disclaimer which highlighted that NFTs carried inherent risk, including price volatility and lack of regulatory oversight.
Assessment
1. Upheld
The CAP Code stated that marketing communications must be obviously identifiable as such, and they must make clear their commercial intent if that was not obvious from the context. In addition, marketers and publishers must make clear that advertorials were marketing communications.
The ASA first assessed whether the tweet was a marketing communication and if it fell within the remit of the CAP Code. We understood that FanCraze had a commercial relationship with Essex County Cricket Club, who had been paid to promote the company on social media. Because payment was made for the tweet and FanCraze had control over the content of the tweet, we considered that it fell within the remit of the CAP Code.
We then assessed whether the tweet was obviously identifiable as a marketing communication. The tweet had been posted on Essex County Cricket Club’s Twitter/X account and did not contain any label or identifier, such as #ad, to make clear upfront that it was a marketing communication for FanCraze. We therefore concluded that the post was not obviously identifiable as a marketing communication.
On that point, the ad breached CAP Code (Edition 12) rules 2.1 and 2.4 (Recognition of marketing communications).
2. Upheld
We noted FanCraze stated that consumers could only use credit cards, debit cards and bank transfers to purchase NFTs on the platform and that transactions took place in US Dollars, and that a cryptowallet with cryptocurrency in it was not required to access the service. The ad did not make any reference to a cryptowallet being required to be able to purchase the NFTs or that they existed on a blockchain. However, text on the ‘Terms of Use’ section of the FanCraze website stated users would need a FanCraze Wallet, which was an electronic wallet on the Flow Blockchain, accessed via the FanCraze platform, which FanCraze confirmed was the only place the NFTs could be sold or traded. We considered that was important information consumers would want to know about upfront.
Because the ad did not make consumers aware that a FanCraze wallet was required to purchase the NFTs, and that they existed on a blockchain, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), and 3.9 (Qualification).
3. Upheld
The ad highlighted that consumers could use NFTs to win “cash rewards”, and emphasised their worth. We considered that by doing so, the ad promoted NFTs on the FanCraze platform as investments. More generally, we considered consumers might purchase NFTs to acquire something that had a store of value that they hoped would hold or increase in value over time and that they would view the purchasing and trading of NFTs as an investment opportunity. However, the ad did not make any reference to it promoting an investment product and we considered that this was material information, the omission of which was likely to mislead consumers.
Furthermore, as per the “Terms of Service” section on the FanCraze website, we also understood that consumers were liable to pay a ‘gas fee’ for every transaction on the Flow Network, which we considered to be material information that consumers would want to know upfront.
Because the ad did not include any risk warning making consumers aware that they were liable to pay a gas fee, and that it was referring to an investment product, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
4. Upheld
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 also understood that NFTs were a volatile cryptoasset, subject to frequent change and one that could potentially lead to large losses. Given the risks and complexities associated with cryptoassets, we considered this was material information that consumers would want to know before engaging with NFTs.
We welcomed FanCraze’s assurance that they would ensure all future marketing communications in the UK would include a disclaimer which highlighted that NFTs carried inherent risk, including price volatility and lack of regulatory oversight.In addition, because the NFTs purchased by consumers could only be used on the FanCraze platform, we considered the ad, and all future marketing communications, should also highlight the NFTs existed on a proprietary system and could not be sold or traded outside of it.
Because the ad did not make consumers aware that NFTs were an unregulated cryptoasset and that the value of NFTs could go down as well as up, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
Action
The ad must not appear again in its current form. We told FanCraze Technologies Inc. and Essex County Cricket Club to ensure that their future ads were obviously identifiable as marketing communications. We also told FanCraze to ensure their advertising made clear the risks of NFTs by stating that they were an unregulated cryptoasset which required a cryptowallet and that their value could go down as well as up and included all material information regarding fees and the limitations of owning NFTs on a proprietary system.
