For years, up to five teams from the top domestic leagues in Europe have been able to qualify for the tournament.
In the past, the competition was reserved only for teams who had won their domestic title and that rule still applies to some of the lesser European nations.
And McCoist believes they should have a re-think over the name if they continue to allow teams who have not won the title into the competition.
Last year’s final was contested by Liverpool and Tottenham, neither of whom were reigning champions in England.
And McCoist told talkSPORT: “The tournament is effectively wrongly named. They call it the Champions League and there are probably more teams that don’t win their championship in it now.
“So, effectively, the name of the tournament makes a mockery of the tournament.”
Liverpool’s last domestic title came in 1990 while Tottenham have not won the English top-flight since 1961.
And McCoist added: “The Champions League last year was contested by two teams who haven’t won their championship in a combined total of 85 years. Thin about what I’ve just said there.
“This is the point I’m making, the cup shouldn’t be called the Champions League.
“If you’re going to continue with it in this format, change the name of it.”
The Champions League group stage will get underway on September 17 and will feature four English teams – champions Manchester City, Liverpool, Chelsea and Tottenham.
The group stage draw takes place in Monaco on Thursday, August 29 and usually gets underway at 5pm.
Liverpool will be a top seed in pot 1 along with reigning Europa League champions Chelsea.