FCA shows football clubs the yellow card over Crypto sponsorship deals
The Financial Conduct Authority (FCA) recently issued a letter1 to Premier League football clubs setting out its concerns about sponsorship arrangements between clubs and unauthorised cryptoasset businesses2.
The FCA has seen an uptick in clubs partnering with unauthorised cryptoasset exchanges or trading platforms, some of which appear to the FCA to be operating unlawfully, for example by issuing unlawful financial promotions and/or failing to comply with applicable registration requirements under the UK anti-money laundering (AML) regime. By partnering with clubs, the FCA is of the view that cryptoasset businesses operating illegally in the UK may be legitimised and expose UK consumers to harm.
By way of context, although cryptoasset promotions are now brought within the UK financial promotion regime, most cryptoasset activities themselves remain outside the full scope of regulation of the Financial Services and Markets Act 2000 (FSMA), pending the introduction of a broader cryptoasset regulatory regime, currently expected to come into force from October 20273. This makes the financial promotions regime a key route through which the FCA is currently regulating crypto-related activity.
The FCA has warned that clubs risk committing criminal offences if their own promotional materials relating to the financial products and services of such sponsorship partners constitute unauthorised financial promotions, and/or if sponsorship funds provided to clubs fall within the definition of “criminal property” under the Proceeds of Crime Act 2002 (POCA) where they have been generated through unlawful products, services or financial promotions.
Risks for clubs
As most football clubs will not be FCA authorised, the regulator does not have the full breadth of its supervisory or enforcement powers at its disposal; however, clubs may be exposed to the following risks:
Financial Promotions – clubs' promotional materials which invite or induce consumers to purchase a sponsorship partner’s financial products or services may constitute financial promotions. Before issuing such promotional materials, clubs must either be FCA authorised or obtain approval of the promotion from an FCA authorised firm unless an exemption applies or the communication is made by a cryptoasset firm registered under the UK Money Laundering Regulations (MLRs). If clubs communicate unlawful financial promotions, the FCA may prosecute the club and/or its senior individuals. The FCA also has broad supervisory and enforcement tools, including applying for injunctions requiring the removal of unlawful promotions and taking steps (including working with online platforms and service providers) to disrupt illegal marketing. In theory, this could extend to requiring the removal or suspension of branding and associated marketing materials across physical and digital assets.
Criminal Property – sponsorship funds received or used by clubs which originate from criminality, including proceeds derived from unlawful financial promotions, operating cryptoasset businesses in breach of the UK AML regime or, where applicable, the carrying on of regulated activities without authorisation, may, in certain circumstances, amount to ‘criminal property’, exposing clubs to potential criminal prosecution. POCA offences are typically prosecuted by the Crown Prosecution Service or the Serious Fraud Office, but the FCA has statutory powers under POCA to apply to the High Court for property freezing orders and civil recovery orders to freeze and recover criminal property, independent of any conviction.
Legal, operational, and reputational risk – criminal prosecutions would undoubtedly cause significant reputational damage to clubs, particularly where affected consumers comprise the club's own fan base, fostering embitterment and eroding supporter trust. The recovery of sponsorship funds under POCA would also create substantial operational difficulties for clubs and is likely to frustrate existing and prospective high-value sponsorship arrangements. Furthermore, the Memorandum of Understanding4 between the FCA and the Independent Football Regulator (IFR) provides for information sharing between the two regulators, meaning that adverse findings by the FCA in this context could result in further regulatory consequences for clubs under the IFR's supervisory remit.
Although the FCA’s letter was aimed at football clubs, in our view, the risks outlined above apply equally to any person who has or wishes to enter into sponsorship arrangements with unauthorised businesses.
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What club should do now
The FCA is actively monitoring risks arising from sponsorship arrangements involving unauthorised businesses, particularly where such arrangements may facilitate unlawful activity or increase the risk of consumer harm. Clubs must act now, as the consequences for failing to act could be significant.
Before entering into sponsorship arrangements with any financial services business (whether a cryptoasset business or otherwise), clubs should carry out appropriate due diligence to ensure the sponsorship partner does not act unlawfully. As a minimum, clubs are expected to:
Carry out reasonable checks to understand whether and how the products and/or services offered by the sponsorship partner constitute regulated activities or otherwise require registration under the AML regime
Use the FCA’s Firm Checker5 to check if the sponsorship partner is FCA authorised or registered and has permission to provide the relevant financial products and/or services
Consider whether the sponsorship partner has appropriate controls in place to prevent unlawful targeting of UK consumers (including geo-blocking where required)
If the sponsorship partner is not FCA authorised or registered, search the FCA’s Warning List6 to check if it has been identified by the FCA as potentially operating unlawfully. If the sponsorship partner does not appear on the FCA’s Warning List, carry out further due diligence to ascertain if it is exempt from authorisation, or relies on a statutory exclusion to carry on regulated activities, and the approval mechanism for any financial promotions it issues
Take reasonable steps to verify the source of any sponsorship funds, to identify if they may have originated from criminal conduct
Carry out ongoing monitoring of the arrangements and the sponsorship partners to ensure compliance through the full sponsorship period
If clubs have already entered into sponsorship arrangements, where possible, carry out retrospective due diligence
How we can help
The FCA's intervention underscores the need to take a proactive approach to due diligence, compliance and risk management when entering into sponsorship arrangements with financial services businesses.
We are supporting clients to:
assess whether prospective or existing sponsorship partners are carrying on regulated activities and whether they hold the requisite FCA registration or authorisation
review promotional materials to identify and mitigate the risk of communicating unlawful financial promotions
evaluate exposure to proceeds of crime risks in connection with sponsorship funds and implement appropriate safeguards
navigate the regulatory landscape, including the interplay between the FCA and other regulators, such as the IFR
Key takeaway
Sponsorship arrangements are increasingly being treated as a distribution channel for financial promotions. As a result, clubs are not passive counterparties and may themselves be exposed to regulatory and criminal risk.
Given the FCA's active monitoring of this area, early engagement will be key to managing risk effectively. If you would like to discuss how these developments may affect your club, please contact Sushil Kuner or Josh Bates.
[1] Sponsorship arrangements between football clubs and unauthorised firms
[2] Full regulation of cryptoassets under FSMA is set to commence on 25 October 2027. Currently, unless a cryptoasset business carries on regulated activities in respect of security tokens or e-money tokens (which fall within the existing perimeter), there is no general requirement for FCA authorisation. Instead, only specific UK cryptoasset service providers, namely exchanges (including peer-to-peer providers, ATMs, and issuers conducting Initial Coin Offerings) and custodian wallet providers, must register with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
[3] Authorise or Exit: The FCA’s Crypto Regime is almost here – are you ready?
[4] Memorandum of Understanding between the Independent Football Regulator and the FCA
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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