Leicester City are not at risk of a points deduction this season after the English Football League said it does not have the power to punish clubs for Premier League breaches.
Leicester followed up by taking legal action, arguing a points penalty while in the Championship would be unlawful.
The EFL has now admitted regulations will not allow such a sanction.
The EFL said: “Having taken legal advice, the EFL has confirmed to all parties that whilst it would want to respect any decision of a Premier League disciplinary commission (and vice versa) to deduct points in the EFL, it does not have the power under the regulations as currently drafted.”
Part of Leicester’s legal action involved them claiming that the EFL had acted unlawfully, although this was rejected by a league arbitration panel.
Leicester, who also had a transfer embargo imposed on them by the EFL after the Premier League charged them for financial breaches, reported a loss of £89.7m for the 2022-23 season.
It took their total losses for their last three Premier League campaigns to over £215m.
Top-flight rules permit clubs to lose £105m over a rolling three-year period.
Current Championship leaders Leicester, whose statement in relation to the EFL announcement came out just three hours before their game at Plymouth on Friday, said they will continue to “try and co-operate constructively with both the Premier League and the EFL to reach a lawful resolution of any issues relating to PSR”.
The club added any charges against them “should be properly and proportionately determined, in accordance with the applicable rules, by the right bodies, and at the right time”.
Nick Mashiter, BBC Sport senior football news reporter
Leicester are understood to be extremely unhappy at the EFL’s attempts to dock them points this season.
There is a feeling at the club the EFL has acted beyond its means as it looked to impose a punishment this term, even if its regulations will not allow them to impose a points penalty this season.
Their statement on Friday – just hours before a crucial game at Plymouth as they look to keep their promotion bid on track – underlined the bitter taste which is lingering while the Foxes look to return to the Premier League.
Yet they still have been charged by the Premier League for breaching profit and sustainability rules, leaving them in a precarious position regardless of any issues with the EFL.
