Lyon Relegated from Ligue 1 Amid Financial Crisis – Palace’s European Hopes in the Balance

Lyon Demoted Over Financial Failings

Seven-time French champions Lyon have been relegated from Ligue 1 to Ligue 2 following a damning verdict from the DNCG—the French football financial watchdog. The decision, initially provisional in November, was confirmed after club officials, including owner John Textor, failed to convince the DNCG that their financial recovery plan was adequate.

Textor’s Eagle Football Group, which owns a 77% stake in Lyon, had announced debts of £422 million last October. Despite efforts to shore up the balance sheet, the governing body was not persuaded. In a statement, Lyon described the ruling as "incomprehensible" and vowed to appeal.

Potential Knock-On Effects for Crystal Palace

The decision has major implications for Crystal Palace, who qualified for the Europa League after lifting the FA Cup. UEFA rules prohibit two clubs under the same ownership structure from competing in the same European competition.

Textor, who has a 43.9% stake in Palace, only agreed to sell his share to Woody Johnson, owner of the New York Jets, this week. However, UEFA has yet to confirm whether that transfer of ownership would be sufficient to resolve the conflict.

Interestingly, Lyon's demotion could nullify the issue altogether. If the ruling stands, their sixth-place finish in Ligue 1 last season—enough to earn European qualification—will be annulled, potentially clearing the way for Palace to compete.

Lyon Say They’ve Done Enough

"With proven funds and sporting success that has earned us a place in European competition for two consecutive years, we sincerely do not understand how an administrative decision could relegate such a major French club," read a Lyon statement.

The club highlighted key financial moves aimed at compliance: the sale of Maxence Caqueret to Como in January and Rayan Cherki to Manchester City in June raised around £45 million. High earners like Alexandre Lacazette and Anthony Lopes were also offloaded.

"We will appeal to demonstrate our ability to provide the necessary financial resources to guarantee OL’s place in Ligue 1," the statement continued.

Historic Club in Crisis

This marks Lyon's first relegation to the second tier since 1989. The club's seven Ligue 1 titles, won consecutively between 2002 and 2008, place them among France’s most decorated teams. Their most recent Champions League semi-final appearance came in 2020.

Their potential replacement in Ligue 1 would be Reims, who were beaten in the relegation play-off by Metz.

The financial chaos recalls the plight of Bordeaux, who were stripped of their professional status after falling to the French fourth division due to bankruptcy just last year.

Textor’s Reassurances Fall Flat

When the DNCG’s provisional verdict was issued in November, Textor confidently dismissed relegation fears. "There is no chance the club will be relegated," he said. "Everything is good financially."

Ahead of Tuesday’s final meeting, he reaffirmed his stance, citing fresh investments and his sale of the Crystal Palace stake as evidence of liquidity.

"Over the past few months, we have worked closely with the DNCG, fulfilling all of its requests with equity investments that exceeded the required amounts," said the club’s latest statement. "Thanks to capital injections from our shareholders and the sale of Crystal Palace, our cash flow has significantly improved."

But the DNCG was not convinced.

What Does This Mean for Palace and UEFA?

UEFA rules prioritise league placement when determining which club from a multi-club ownership structure gets the European slot. With Lyon finishing sixth and Palace winning the FA Cup, Lyon were originally in line to claim the spot. However, their enforced relegation could invalidate that placement.

There remains uncertainty. Sources close to Palace say they were still awaiting formal confirmation on Tuesday night as to how Lyon's punishment would affect their European status.

Even if Lyon’s appeal is unsuccessful within France, further legal battles at the European level could delay clarity for Palace. Until UEFA issues a definitive ruling, Palace remain in limbo, unsure if their first foray into continental football will be realised.

Nottingham Forest Also Watching Closely

If Palace are eventually ruled ineligible for the Europa League, Nottingham Forest, who finished lower in the Premier League, stand to benefit. It’s another layer of complexity in an already tangled web of ownership, regulations, and financial oversight.

With Lyon confirming their intent to appeal and the ownership change at Palace still pending UEFA validation, there’s no quick fix on the horizon. Palace had hoped for clarity by the end of this week—but they may be left waiting much longer.