A report into the collapse of the self-billed ‘football stock market’ Football Index has strongly criticised the behaviour of the Gambling Commission in the run-up to the platform’s collapse in March this year.
The report, published on Wednesday, was led by barrister Malcolm Sheehan QC on behalf of the Department for Digital, Culture, Media and Sport (DCMS) and coincides with the ongoing government review of the Gambling Act 2005.
Football Index was a British gambling platform that operated like a stock market, managed by a company called BetIndex. It let users bet on the success of professional footballers. They could ‘buy’ and ‘sell’ shares in players and then receive payouts when those players performed well. Good performances saw players’ transfer value increase and transfers to other clubs would lead to a rise in their share price.
Users could therefore behave like investors, getting rewarded if they spotted talented players early on and saw a big return on their investments as a result. Many Football Index customers saw the site entirely as a trading platform rather than a gambling one, and Football Index’s use of stock market buzzwords (players were referred to as ‘shares’ and payouts were ‘dividends’) definitely encouraged this.
In March this year, however, Football Index suddenly cut its payouts without warning. After this, users noticed that players’ share prices had suddenly plummeted. To give one example, Manchester United winger Jadon Sancho saw his share price drop from £7.52 to just 72p over the course of a weekend. Since players’ value would normally only change as a result of their performance, it was obvious that something was up. This was Football Index ‘moving the goalposts’, as one customer put it, as it headed towards bankruptcy.
Not long after this, Gambling Commission stripped Football Index of its licence and the platform collapsed, leading to customers losing a combined total of £90m in stakes. The collapse was sudden and devastating for customers, with many individuals losing thousands of pounds.
The sudden collapse of Football Index rightly left many punters wondering how the Gambling Commission could not have seen the disaster coming.
In June, DCMS tasked specialist barrister Malcolm Sheehan with leading an investigation into the collapse. After months of speculation and occasional updates on the case, his report finally emerged this week.
Sheehan’s report contains three main findings.
Firstly, it reveals that Football Index never properly informed the Gambling Commission of how its service actually worked. Football Index received its licence in 2015, but it took three years before the Gambling Commission became aware that the platform provided a ‘stock market functionality’ rather than a standard gambling offering.
Additionally, the report makes it clear that the Gambling Commission failed to act on repeated warnings that Football Index’s business model was unsustainable and took far too long trying to investigate it.
Thirdly, the report finds failings on the part of the Financial Conduct Authority (FCA), the regulator for the financial services industry. Because of how it worked, Football Index should also have been regulated by the FCA. The Gambling Commission did get in touch with the FCA in 2019 for advice on whether Football Index should have joint regulation, but the FCA took four months to respond. After initially agreeing to this, the FCA changed its mind.
Commenting on the report’s release, recently-appointed Minister for Gambling Chris Philp said: ‘I’m extremely conscious of how devastating the collapse of Football Index has been for its many customers, which is why we moved quickly to launch this independent review.
‘We will ensure that the findings from this review feed directly into our ongoing Gambling Act review which is looking at ways we can improve regulation of the gambling industry.’
The report’s publication will probably lead to closer cooperation between the Gambling Commission and the FCA. The two bodies have now signed a Memorandum of Understanding committing to new procedures to quickly identify and act on problems. The FCA has appointed a new Executive Director to oversee this.
Additionally, the Gambling Commission says it will introduce tougher rules on how products are advertised to remove any ambiguity about whether products actually constitute gambling. It will also update its own process for risk assessment when granting licences.
Commenting on the recent developments, Gambling Commission chief executive Andrew Rhodes said: ‘We accept and agree that we should have drawn a line under our efforts sooner, but that does not mean those customers would not have lost money in the event of the BetIndex company collapsing.’
After all the stress that Football Index’s customers were put through, they’ll certainly be hoping that changes will now be coming to prevent any similar incidents in the future.
As a 2020 BA graduate in Modern Languages, Max is fluent in 3 languages - though he only needs English to write bingo news & reviews for Online Bingo!
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