The Swiss FA said its decision to penalize Sion three points for every league and cup game in which ineligible players were fielded was a response to FIFA's threat to suspend all Swiss teams, including FC Basel and the national side, from world football.
Basel is due to meet Bayern Munich in the Champions League round of 16 on Feb. 22, a rare foray into the upper echelons of European football for a club from Switzerland. Had Basel been thrown out, Manchester United, the club it beat to second place in Group C, may have been reinstated.
Sion vowed to fight the decision, which put it bottom of the league with minus five points. The club accused the Swiss FA of a "cowardly act," saying it had caved to pressure from FIFA and was acting against its own statutes.
Sion already filed a criminal complaint Thursday against members of FIFA's executive committee accusing them of blackmail and a breach of basic legal rules by threatening to suspend Switzerland.
FIFA had given the Swiss Football Association until Jan. 13, 2012, to discipline Sion or face suspension over the saga that began in 2009, when world football's governing body imposed a one-year transfer ban on the club for illegally signing goalkeeper Essam El-Hadary.
Sion, which ignored the transfer embargo and signed six players in the off-season, has doggedly contested FIFA's ruling in the courts despite facing increasingly harsh penalties from football authorities.
"The Swiss Football Association has today demanded from FIFA confirmation that the suspension will not now come into effect," the Swiss FA said in a statement. "FIFA's answer is still being awaited."
FIFA said in a statement that it took note of the Swiss league's action and would consider it at an Emergency Committee meeting in early January.
The penalty for Sion falls short of FIFA's demand to give the club 3-0 losses, as this would automatically have resulted in opposing sides gaining the points deducted from Sion, the league said.
Sion will also be allowed to continue in the country's cup competition.
The points deduction may be challenged at the Court of Arbitration for Sport.