Hackney Council has threatened to sue sportswear giant Nike for allegedly using their logo without permission.
Nike said the logo is a symbol of all that is great about amateur football
The council claims a range of World Cup kit featured an exact replica of their logo, a rounded 'H' surrounded by the words London Borough of Hackney.
Hackney Mayor Jules Pipe is calling for a share of the profits which he would invest in local sports development.
Nike said the range celebrates Hackney Marshes, home of Sunday League, and it was in talks with the local authority.
The logo, which appears on public buildings, council vans and staff uniforms in the east London borough has been used on t-shirts, vests, trainers and footballs designed to promote Nike's grassroots football campaign for the World Cup.
Mayor Jules Pipe said: "We have been using this logo for more than 40 years - since before England won the last World Cup.
"I was shocked that such a huge global company would use it without even approaching us for permission.
"One way of putting this right could be giving us a fair percentage of the retail price and some sportswear for every school child in the borough.
"Nike have taken for their own profit something that belongs to the people of Hackney."
He added that he wanted assurances the kit was ethically produced and said merchandise should be withdrawn until a settlement had been reached.
In a statement, Nike said: "Nike has produced a small range of products that celebrate Hackney Marshes as a symbol of all that is great about amateur football.
"The London Borough of Hackney has raised some issues with Nike concerning a logo that appears on a number of these products.
"We are in ongoing discussion with the Borough and remain keen to conclude the discussion to the satisfaction of both parties."
Hackney Marshes is home to 87 football pitches, and is widely considered to be the home of English Sunday League.