Why promoting financial investments is riskier than promoting sneakers

Soccer star Cristiano Ronaldo is facing a class action lawsuit over his relationship with the crypto exchange Binance. While the crypto exchange has already been facing its own legal woes, the complaint filed this week in a U.S. district court in Florida alleges that, among other things, Ronaldo violated several states’ laws by promoting Binance’s unregistered securities and by letting Binance use his image in deceptive statements marketing its products.

But celebrities endorse lots of things that may or may not work as promised, and Ronaldo is not the only celebrity to endorse financial products or services. So what makes the world of finance different?

Promoting a financial investment of any kind comes with greater potential liability than promoting sneakers or cologne. 

“Somebody invests their money and they lose all their money, the damages are a lot higher than if you buy a cologne that just doesn’t smell nice, said Richard Painter, who teaches securities law as a professor at the University of Minnesota. 

There don’t tend to be lawsuits over products unless they cause real harm, he said. But with investments that don’t perform well, the harm is obvious. Plus, celebrities are expected to know what they’re marketing, even if they’re not financial professionals.

“The message from the law is the seller is going to be accountable,” said Painter. “Anybody involved in the sale of unregistered securities has potential liability.”

There are a lot of rules around securities. That’s because that kind of asset can be hard to understand, said Cornell law professor Charles Whitehead.

“It’s not like you can, you know, touch it. You can’t, you know, knock it against the wall. And so as a result, financial assets tend to be more heavily regulated,” he said.

Unless celebrities really know their financial stuff, the University of Minnesota’s Painter cautioned that they’re better off sticking to endorsing other things — like sneakers.