The FCA has issued a warning to football clubs setting out its concerns about sponsorship arrangements between football clubs and firms operating cryptocurrency exchanges or trading platforms without FCA authorisation.

Sponsorship deals with crypto-market players have been pursued by a number of clubs over recent years. However, over this time the regulatory landscape for firms engaged in certain activities relating to cryptoassets has evolved and – of particular significance, many firms (including those operating overseas) are required to comply with UK AML legislation, particularly the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the UK MLRs) and the financial promotion regime in connection with their activities. Meanwhile, landmark reforms to the UK regulatory perimeter established under the Financial Services and Markets Act 2000 (FSMA 2000) will bring a vast number of firms into the full regulatory ambit of the FCA, who are now only subject to limited supervision in connection with AML legislation and financial promotions.

As we flagged earlier this year, the FCA’s current enforcement priorities include investigating suspected unauthorised business, particularly in the cryptoasset sector, where firms provide cryptoasset services without registration under the UK MLRs; and there are a number of higher profile examples of action taken against firms considered to have fallen foul of the financial promotion restriction.

The FCA is now highlighting risks to football clubs from their sponsorship and publicity arrangements with unauthorised cryptoasset firms (particularly exchanges and trading platforms) who appear to be operating unlawfully either because:

1. Their activities constitute a regulated activity in breach of the ‘general prohibition’ at s.19, FSMA 2000; and/or
2. They appear to be communicating financial promotions in breach of the ‘financial promotion restriction’ at s.21, FSMA 2000.

The consequences for clubs are significant. By way of example, funds which clubs receive from unauthorised cryptoasset firms can amount to ‘criminal property’ for the purposes of the Proceeds of Crime Act 2002, with significant implications for clubs themselves, including potential liability for criminal money laundering offences including when dealing with such funds.  From a territorial perspective, conduct which takes place overseas can give rise to proceeds of crime issues if that conduct would be an offence in the UK. 

The FCA is very clear on the steps that clubs should be taking now; and ahead of entering into any sponsorship arrangement with third parties who appear to be carrying on activities related to financial services or markets, including:

1. Baseline due diligence: is the firm you are seeking to enter into an arrangement with carrying on a regulated activity ‘by way of business in the UK’? 

   It is critical for clubs to understand that the UK regulatory perimeter can be triggered by firms whose operations are entirely based overseas. The application of the perimeter in cases of the cross-border supply of financial services is not straight forward; and clubs need to exercise caution and careful judgment informed by sophisticated advice to determine whether the activities of international firms could trigger the UK regulatory perimeter, such that they are required to be authorised by the FCA for those activities. The FCA expects clubs not to simply rely on statements made by sponsorship partners or other third parties, but to establish the efficacy of controls which such firms may have in place to prevent UK consumer access to their services – e.g. through geoblocking – so as to confidently assert that its activity is not carried on ‘in the UK’.

2. Is the firm appropriately authorised? If the firm is providing regulated financial services ‘by way of business in the UK’, then is it appropriately authorised or relying on an exemption?
3. Check the register and other public resources: clubs should review whether the cryptoasset firm appears on the FCA register, and whether they have been flagged on the FCA’s Warning List.

To these items we would add that clubs need to:

4. Assess whether firms are compliant with the financial promotion restriction: clubs need to understand the important distinction in the application of UK territoriality to the conduct of substantive regulated activities, where they are carried on a cross-border basis – e.g. by cryptoasset platforms established overseas, but who may have UK customers;  and the application of UK territoriality in connection with the financial promotion restriction (where the test is whether financial promotions are ‘capable of having an effect’ in the UK).

Implications for clubs and their Senior Managers under the FGA

Many clubs in English football impacted by the FCA’s warning will also be preparing to comply with the new regulatory regime established by the Football Governance Act 2025 (the FGA). Many aspects of this new regime are now in force, including – of particular significance given this warning – the new Owners, Directors and Senior Executives (or ‘ODSE’) regime. As clubs grapple with the implications of the ODSE regime on an ongoing basis for their Senior Managers, issues such as those presented by the FCA in its warning letter will have a new dimension. Independent Football Regulator (IFR) supervisors may well seek to understand the steps taken by certain Senior Managers in response to the FCA’s warning letter, as they continue to assess suitability of Senior Managers on an ongoing basis. Given the clear potential for these arrangements to have a significant impact on clubs’ financial resilience, the IFR (and club supervisors) may well also seek to understand the diligence undertaken by clubs in the first instance, ahead of entering into sponsorship arrangements with unauthorised third parties.

As many affected clubs prepare for the introduction of the IFR’s provisional licensing regime – with the application window opening in November this year – this warning from the FCA will take on new significance. Information gateways between the IFR and the FCA mean that these sponsorship arrangements between relevant clubs and unauthorised third parties may well feed into the IFR’s decision-making processes in connection with club licensing; and clubs will wish to ensure they have fully assessed the legal position of any ‘questionable’ arrangements and taken appropriate steps accordingly.

Our briefing note on the IFR’s new ODSE regime, which explains the key concepts and requirements on clubs and Senior Managers, can be found here.

Cryptoasset activities entering the FSMA framework

Many cryptoasset firms in the UK and overseas are now assessing the implications of major UK regulatory reforms to bring cryptoasset activities into the UK’s financial services regulatory framework under FSMA 2000.

Our market leading Financial Services and FinTech team is supporting firms already in connection with their UK authorisation under the new framework, and has extensive experience advising firms across the financial services industry on transactions in the sector, regulatory project change and implementation; as well as on regulatory investigations and enforcement. 

We have a number of resources for firms navigating the complex regulatory environment for cryptoasset activities in the UK and overseas.

At our recent event, focused on authorisation for cryptoasset firms, we explained in practical terms how firms should approach the authorisation process. We also covered key considerations such as identifying the right permissions, strengthening business plans, addressing common pitfalls, governance and senior manager requirements, consumer duty and financial promotions, and financial crime and AML frameworks, along with broader insights into engaging effectively with the FCA. The session also features guest speaker Rahul Ahluwalia, CEO of the Office for Investment, who shared his perspective on the evolving digital assets landscape. You can access this content now as a webinar here.

Our Global Crypto Market Webinar series brings together our lawyers from around the world to provide their insights and perspectives on the latest developments shaping the digital asset space. From regulatory shifts and compliance challenges to enforcement trends and emerging crypto disputes, our sessions explore the key issues impacting businesses, investors, and market participants in this rapidly evolving ecosystem. You can find more information on the series here.

Do get in touch with me or my colleague Josh Creutzberg, or with my partners Jonathan Herbst, Hannah Meakin and Katie Stephen if you wish to understand what the FCA’s warning letter means for your club or your firm and the steps to take now.