UK advertising watchdog slams FC Barcelona over misleading NFT ad
The UK Advertising Standards Authority (ASA) has issued a ruling against an NFT ad by FC Barcelona.
The ad in question is a paid for Google search result, for a Barcelona Football Club non-fungible token (NFT) being sold at Sotheby’s and seen in July 2022. The ad featured the text, “July 29, 2022 – NFT Johan Cruyff. Don’t miss the live auction. The first NFT Masterpiece of FC Barcelona. Premiere July 29th. Johan Cruyff’s “impossible goal” in 1973. Immortalized and offered as an exclusive NFT”.
The ASA challenged whether the ad was misleading because it didn’t make clear:
- 1. the risks associated with Non-Fungible Tokens (NFTs);
- 2. that auction house fees, sales tax and third-party wallet transfer fees applied; and
- 3. that there were significant restrictions on ownership rights.
The ASA noted that 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.
NFTs were an unregulated cryptoasset that required the owner to open and maintain a cryptowallet. Given the risks and complexities associated with cryptoassets the ASA considered this was material information that consumers would want to know before engaging with NFTs.
The ad promoted an “exclusive” NFT that could be purchased via an auction. The ASA noted FC Barcelona’s comments that the NFT was a collectible and therefore not a financial product. The Authority recognised that consumers might purchase NFTs by way of auction for different purposes as was the case with auctions for physical artwork.
However, the ASA noted that NFTs could be bought, held and sold as an investment, even if they were not directly marketed as a product that could generate a return. The ASA further understood that regardless of the range of reasons a consumer might have for purchasing an NFT, they were in all cases a volatile, unregulated cryptoasset, subject to frequent changes in value which could potentially lead to large losses.
Because the ad did not include any risk warning making consumers aware that the value of NFTs could go down as well as up, or that they were an unregulated cryptoasset the ASA 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).
The CAP Code stated that marketing communications must not mislead the consumer by omitting material information and must state significant limitations and qualifications.
The ASA understood that the purchase of the NFT was subject to paying Sotheby’s a buyer’s premium (25% of the hammer price), sales tax, an overhead premium (1% of the hammer price) and a gas fee to transfer the NFT to a digital wallet. In addition, anyone who bought the NFT did not have intellectual property rights for the image, could not display it for commercial purposes or modify it in any way. Therefore, the fees and limitations on ownership were relevant to the ad and we considered material information that consumers would want to know upfront.
While the ASA acknowledged FC Barcelona’s comment that paid for Google ads did not contain sufficient space to include the requisite warnings, the ASA understood that if such ads did not have the necessary space then they were not the correct medium for promoting this particular NFT.
For those reasons, because the ad omitted material information, the ASA concluded that the ad was misleading.
On those points, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 and 3.10 (Qualification).
The ASA ruled that the ad must not appear again in its current form. The ASA told FC Barcelona that their advertising must make clear the risks of NFTs by stating that they were an unregulated cryptoasset and that their value could go down as well as up. They should also not omit material information regarding fees and charges on their platform and limitations of ownership for the NFT.
Earlier in 2022, the Authority issued an Enforcement Notice to over 50 companies which advertise cryptocurrencies, instructing them to review their ads and to ensure they understand and are complying with the rules so that consumers are treated fairly.
The Enforcement Notice provides guidance to the crypto industry on how to stick to the rules and warns that the ASA will monitor for compliance and implement sanctions if it does not see improvements.
The ASA has issued a number of rulings against crypto ads, including ones by companies like eToro.