Background
On 8 October 2023 the FCA took over the regulation of ads for ‘qualifying cryptoassets’ – cryptoassets that are transferable and fungible, including cryptocurrencies and utility (fan) tokens – and introduced new rules. However, cryptoassets as a product remain unregulated. As of this date, complaints about misleading non-broadcast advertising for qualifying cryptoassets will be referred to the FCA for their consideration. The new rules do not cover cryptoassets that are non-fungible, such as Non-Fungible Tokens (NFTs), 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, and the ASA will continue to regulate all ads for these products.
Summary of Council decision:
Three issues were investigated and all three were Upheld.
Ad description
A paid for Facebook ad for Turtle United, a non-fungible token project, seen in July 2022, had text that stated, “Minting Soon: Turtle United NFT. Turtle United is the 1st NFT Project that is creating a powerful movement in the Metaverse – Offering a lot of Value for its Holders whilst Investing in a plethora of Ecological projects to Save Earth. 500 Unique NFTs: The Genesis Collection. Free VX Collection Airdrop for Holders. Stake within the TU Ecosystem. Access to Exclusive Giveaways. First S2E Gamification Experience. Minting on 19th July. Be a part of the #TUMovement! Join Discord Now!” Beneath the text was an image of a man taking a photo of a picture of a turtle in a gallery setting. Text on the image said, “TURTLE DEL GIOCONDO SOLD FOR 7.07 ETH.”
Issue
The ASA challenged whether the ad was misleading because:
1. the ad failed to illustrate the risk of NFT investment;
2. it didn’t make clear that past performance or experience does not necessarily give a guide for the future and because the claim “offering a lot of value for its holders” implied the NFTs had an assured significant value; and
3. it didn’t state the minting price and that gas fees applied.
Response
Turtle United NFT did not respond to the ASA's enquiries.Assessment
The ASA was concerned by Turtle United NFT’s lack of response and apparent disregard for the Code, which was a breach of CAP Code (Edition 12) rules 1.7 1.7 Any unreasonable delay in responding to the ASA's enquiries will normally be considered a breach of the Code. (Unreasonable delay). We reminded them of their responsibility to respond promptly to our enquiries and told them to do so in future.
1. 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.
The ASA understood that NFTs were an unregulated cryptoasset, that needed a cryptowallet, and that was important information consumers would want to know upfront. In addition, we noted that NFTs could be used as an investment, even if not directly marketed as a product that could generate a return. The ad used an example of a previous NFT that sold for 7.07 ETH and described their NFTs as offering “a lot of Value”.
We understood by highlighting the previous sale of an NFT and emphasising their worth, the ad promoted their NFTs as investments.We understood that NFTs were a volatile cryptoasset, subject to frequent change and one that 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 we concluded that the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising),
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
(Qualification) and
14.4
14.4
Marketing communications must make clear that the value of investments is variable and, unless guaranteed, can go down as well as up. If the value of the investment is guaranteed, the marketing communication must explain the guarantee.
(Financial products).
2. Upheld
The CAP Code stated marketing communications should make clear that past performance or experience did not necessarily give a guide for the future; if they were used in marketing communications, examples of past performance or experience should not be unrepresentative. In addition, marketing communications must not materially mislead or be likely to do so.
The ad included a picture of a turtle and said, “TURTLE DEL GIOCONDO SOLD FOR 7.07 ETH”. The ad therefore used the past performance of one of their NFTs to encourage consumers to purchase more but it had not made clear that the example was not necessarily a guide for the future.
In addition, we understood that the claim, “Offering a lot of Value for its Holders”, in the absence of any further explanation or qualification, implied that the NFTs had a substantial assured monetary value. However, like any investment, the price of the NFT could go down as well as up and therefore to state it had “Value” and imply that it would remain unchanged was misleading.
For those reasons because the ad did not make clear that past performance did not necessarily give a guide for the future and that the ad implied a large, assured value for their NFTs, we concluded the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising),
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
(Qualification) and
14.5
14.5
Marketing communications should make clear that past performance or experience does not necessarily give a guide for the future; if they are used in marketing communications, examples of past performance or experience should not be unrepresentative.
(Financial products).
3.Upheld
The CAP Code stated that marketing communications must not mislead the consumer by omitting material information and must state significant limitations and qualifications. Marketing communications must also make clear the extent of the commitment the consumer must make to take advantage of a "free" offer.
We understood that consumers were liable to pay a minting price of 0.2 ETH (approximately £250) plus a gas fee. We further noted that the ad promised a “FREE VX Collection Airdrop for Holders”.
We considered that the minting price and gas fee were material information that consumers would want to know upfront, especially because the ad promoted a free offer and should have made clear the level of commitment a consumer needed to make to take up that offer. Therefore, because the ad omitted material information and did not make clear the full extent of what a consumer had to do to take up the free offer, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising),
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
and
3.10
3.10
Qualifications must be presented clearly.
CAP has published Advertising Guidance on Misleading advertising: use of qualifications.
(Qualification) and
3.23
3.23
Marketing communications must make clear the extent of the commitment the consumer must make to take advantage of a "free" offer.
(Free Principle).
Action
The ad must not appear again in its current form. We told Turtle United NFT 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 further make clear that the examples of past performance, were not necessarily a guide for the future, must not imply that NFTs had a large, assured value and should not omit material information on fees. We referred the matter to the CAP compliance team.
CAP Code (Edition 12)
1.7 3.1 3.3 3.23 14.4 14.5 3.10 3.9
