ASA Rulings Recap January 2022

This month, the ASA focused on irresponsible and misleading advertising of crypto currency trading with a number of rulings upheld against various brands.

In December 2021 the ASA upheld multiple rulings against crypto currency trading advertisements. The two main reasons for this were:

• The advertisements were irresponsible because they took advantage of consumer’s inexperience and trivialised investment in crypto assets.
• The advertisements were misleading as they failed to illustrate the risk of the investment.

The context is that The CAP Code requires that marketing communications for investments make clear that the value of investments are variable and can go down as well as up, and that significant limitations and qualifications are stated and presented clearly.   

Arsenal FC

The Complaint:

The ASA itself challenged the advertisement on the two grounds listed above and an additional ground that the token didn’t make clear the token was a cryptoasset and therefore that Capital Gains Tax (CGT) may need to be paid on profits.

The Defence:

Arsenal responded in depth, and we have summarised these:

1. that Socios was well known in the football community as a cryptocurrency platform, and in conjunction with the wider information about Fan Tokens and Socios, and the information provided in their ads, viewers would understand that Fan Tokens had to be bought with cryptocurrency.
2. that neither post implied that money could be made from Fan Tokens, as they were not ads for cryptocurrency investments and so there was no requirement to include a warning, however they believed that they had included a warning in the ad anyway as it was the “responsible thing to do”.
3. that Fan Tokens were utility tokens to encourage fan participation, and so were materially different to cryptocurrencies. They said that they are not specified investments under the FCA 2002.
4. that even if the ASA disagreed with their view that the ads did not promote Fan Tokens as a form of financial investment, there was no express requirement in the CAP Code or ASA guidance cryptoasset rulings for advertisers to explain that CGT may be payable on profits from financial investments. Arsenal felt they “should not be sanctioned for failing to include a warning about CGT when there was no regulatory requirement to include this information”.

The Ruling:

UPHELD – The ASA disagreed, and pointed out that utility tokens are categorised by the FCA as cryptoassets, and the ASA understood that they could be used as a form of investment, regardless of how they were promoted. By signing up to Socios, Arsenal members would have the potential to go on to buy and trade more tokens in the future. The AS held that the promotion of the free Fan Tokens “encouraged consumers to engage in such a high-risk investment without consideration and trivialised what was a serious and potentially costly financial decision”. The ASA considered that whilst the cryptoasset product was not regulated by the FCA and therefore not subject to the FCA’s financial promotions rules, consumers would be less likely to be familiar with this kind of cryptocurrency. Also, potential tax implications should have been made sufficiently clear to consumers and they were not.

The ASA held that one of the ads did not include any risk warning to make consumers aware that cryptoassets were unregulated in the UK and cryptoassets could go down as well as up, and in the other ad the risk warning was not prominent and didn’t cover both points, the ads were misleading.

The ASA also held that as one of the ads did not refer to the Fan Tokens being a cryptoasset and had to be exchanged with another cryptocurrency, the ad was misleading.

Rules Breached:

CAP Code – 1.3 – social responsibility, 14.1, 14.4 – financial products, 3.1, 3.3 – misleading advertising, 3.9 – qualification.

Papa John’s Ltd:

The Complaint:

Again, the ASA challenged whether the ads were irresponsible as they took advantage of consumers inexperience and trivialised investment in cryptocurrency.

The Defence:

Papa John’s stated that they had a long running association with cryptocurrency, dating back to 2010 when it was believed that Bitcoin had been used to buy two pizzas. And so on 23 May each year, they commemorate #BitcoinPizzaDay. They stated that there was no obligation on consumers to trade or make a transaction in the Luno account to get the free amount and that their ads made no comment on investing in Bitcoin.

Whilst they acknowledged that some customers would have more knowledge of cryptocurrency than others, due to their “historic” connection to Bitcoin they believed that their partnership with Luno would not be seen as unusual. They also confirmed that they had removed the adverts.

The Ruling:

UPHELD – the ASA acknowledged that consumers had the option to cash out at any time and there was no obligation to trade further or invest their own money, however they would still have to set up an account with Luno, a cryptocurrency exchange, giving consumers the option to trade in cryptocurrencies. As the ads were addressed to the general audience, most of whom would likely be inexperience in their understanding of cryptocurrencies and the risks in doing so, of which neither of the ads discussed.  

The ASA felt that the use of pizza to promote a cryptocurrency account, encouraged consumers to engage in such a high-risk investment without consideration and trivialised what was a serious and potentially costly financial decision, especially when the intended to audience were likely to have a limited understanding of cryptocurrency, they were held to be irresponsible.

Rules Breached:

1.3 – social responsibility, 14.1 – financial products.

eToro (UK) Ltd:

The Complaint:

Again, the ASA challenged whether the ad was irresponsible as it took advantage of consumers inexperience and misleading as it failed to illustrate the risk of the investment.

The Defence:

eToro acknowledged that in this instance the appropriate risk warning was missing due to a lapse in their review process. They said that any consumer who used their service would be presented with the relevant product information to make an informed decision. In their correspondence with the FCA, the issue of tax implications in financial promotions was not raised or discussed and there was no regulatory basis for Capital Gains Tax (CGT) to be included in a financial promotion and so they understood there was no requirement for those.

eToro said they were not tax advisors and at no point during the customer journey did they dedicate or distinctively provide any advice about the tax treatment of any of their products or services to their clients. They also said that their users were from many different geographic locations and so they believed it to be irresponsible and misleading to present tax information to a global audience which was only relevant to the UK.

They removed the ad and said they would conduct a full audit of their paid-for ads, making any necessary changes and removing non-compliant ads.

The Ruling:

UPHELD – the ASA felt that cryptocurrency investment was so sophisticated and complex, and in the absence of any information to the contrary, consumers would interpret the overall impression from the ad to be that investment in cryptocurrency was simple and suitable for anyone.

In the absence of information, The ASA considered that most consumers would not be aware that CGT had to be paid on profits from investing in cryptocurrency.

The ASA accepted that eToro had a global user base and information relating to CGT was only relevant to consumers from the UK. However, the ad in question was seen on the Yahoo Finance website, seen in the UK and therefore was targeting UK consumers, so eToro should have provided the relevant information regarding CGT and if necessary, highlight in the ad that this information only applied to UK consumers. The ASA therefore held that the ad took advantage of consumers inexperience and was therefore irresponsible.

The ASA acknowledged that the lack of qualification was an error made during the review process and steps have been put in place to stop this from happening in the future. However as no risk warning was included, the ad was held to misleading.

Rules Breached:

1.3 – social responsibility, 14.1 – financial products 3.1,3.3 – misleading advertising, 3.9 – qualification.

Lessons to be learnt:

Whilst this is not the first the same the ASA has targeted crypto adverts, the examples this month, and the other similar rulings upheld by the ASA, highlight that cryptocurrency promotions are now in the eyeline of the ASA., and they don’t look to be letting up.

Furthermore, the decision by the ASA to uphold that the failure to mention that CGT would be payable on profits from investing, in excess of the annual CGT allowance, is interesting. It highlights the need for the FCA to regulate financial advertisements like the above, more effectively, as perhaps they are that bit too far out of the ambit of the ASA.

The government has been looking at making specified cryptoassets fall under financial promotions regulations and the FCA have also been looking for ways to reduce the risk of advertising promoting scams in relation to cryptoassets and trading on social media platforms, such as requiring advertisers of UK regulated financial services to first be authorised by the FCA, hopefully reducing the need for the FCA to make the same number of rulings as they did in December.