Crystal Palace are set to be ‘demoted’ to the Europa Conference League – with Nottingham Forest likely to leapfrog them into the Europa League.

French side Lyon announced on Wednesday afternoon that they had won their appeal against their relegation from Ligue 1.

Had the decision stood, it would have meant that Palace, the FA Cup winners, would have been in next season’s Europa League. 

However, it now means the south London side are set to be ‘relegated’ to the third-tier competition thanks to UEFA’s rules on multi-club ownership.

As Mail Sport revealed, Palace officials jetted to UEFA headquarters last month to plead their case. 

Competition rules mean that, in instances where one person has control over multiple clubs which qualify for the same European tournament, the one which finished higher in its domestic league takes the slot.

Palace’s issue was that John Textor, the US businessman whose Eagle Football Holdings has the majority stake in the club, also had the majority share of Lyon. And because Lyon finished sixth compared to Palace’s 12th, they took the slot.

Palace had argued that Textor, who subsequently sold his 43 per cent stake for £190million to Woody Johnson, had no say in the running of the club. 

However, the failure to take action to separate Textor from the club before UEFA’s March 1 deadline landed them in an administrative nightmare.

There had been hope for Palace after Lyon were relegated after breaching financial rules in France. 

However, their successful appeal will cause devastation at Selhurst Park.

As a knock-on effect, it would appear that Forest, who were in the Conference League, will be promoted to the Europa League and effectively take Palace’s spot. UEFA officials will now meet before a decision is communicated.

A Lyon statement said: ‘Olympique Lyonnais welcomes today's decision by the DNCG to keep the Club in Ligue 1. 

'OL thanks the Appeals Committee for recognizing the ambition of the Club's new management, determined to ensure serious management in the future.‘

'The new management, supported by the commitment and dedication of our shareholders and lenders, is extremely grateful for all the support received both within and outside the Club, including from its supporters, employees, players, partners and elected officials.

‘Today's decision is the first step in restoring confidence in Olympique Lyonnais. We can now focus our attention on our sporting objectives and fully prepare for next season.’

Lyon had been relegated from Ligue 1 following an audit of their books by the Direction Nationale du Controle de Gestion (DNCG), the body responsible for overseeing the finances of French football clubs. 

Last year, they reported debts of around €500 million (£418m).

That was seen as a 'game-changer' for Palace and major boost to their Europa League hopes. 

But this latest ruling on Lyon's fate lands as a sucker punch for the south London side, who qualified for the first time after winning the FA Cup.