MPs: Gambling Commission’s failure to adequately regulate Football Index ruined lives

Calls for lessons to be learned from the site’s collapse as MPs voice concerns over reports two senior Football Index individuals are behind a similar ‘trading site’ launch
The post MPs: Gambling Commission’s failure to adequately regulate Football Index ruined lives first appeared on EGR Intel.  

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MPs have roundly slammed the Gambling Commission’s (GC) light-touch regulatory oversight of Football Index, the self-styled football stock market which spectacularly imploded three years ago.

Some customers lost five- and six-figure sums when Football Index’s Jersey-based parent company BetIndex went into administration, while it is thought at least £100m was left stuck in ‘open bets’ on the platform.

The GC faced fierce criticism in the aftermath of Football Index’s demise for its role in regulating the product and whether action could have been taken sooner after the regulator was warned years earlier that it appeared to be a pyramid scheme.

Yesterday, 24 April, MPs in a Westminster Hall debate on the lessons to be learned from the collapse, hit out at the role the GC played as Football Index rose and eventually crashed, with Labour MP Liz Twist highlighting how the product had been “incorrectly regulated for the majority of its lifetime”.

She went on to say: “These failures cost victims dearly, with many of them losing their homes, their life savings, or wedding funds, causing them huge amounts of stress, anxiety and depression, not to mention financial difficulties for some.

“My constituent, Colin, spent months unable to work as a result of the stress. He told me, ‘That money could have been used for my children’s future, for housing improvements or holidays’.

“Indeed, many victims are reluctant even to come forward due to the shame that they feel that they could have been misled in such a way,” she added.

Meanwhile, fellow Labour MP Barbara Keeley said one of her constituents, a farmer, lost £20,000 and that the “stress, guilt and shame” had put him in “some very dark places”.

As for the product itself, MP for Ellesmere Port and Neston Justin Madders told the debate: “We know that the executives of Football Index were warned soon after its launch, as early as 2016 in fact, that their so-called football stock market would prove to be unsustainable.

“And all these warnings occurred some five years before its eventual collapse, leaving serious questions about how effective regulation was.

“According to reports, the Gambling Commission were warned in January 2020 that Football Index was, and I quote, ‘An exceptionally dangerous pyramid scheme under the guise of a football stock market’. Well, we all know that proved to be correct.”

He added: “And perhaps the unusual nature of the product meant they carried on without effective intervention.”

A house of cards

Back in October 2021, just months after BetIndex went to the wall, GC CEO Andrew Rhodes insisted Football Index “was not operating a Ponzi scheme”. 

His comments at the time were in response to a 67,000-word independent review initiated by the government and conducted by barrister Malcolm Sheehan KC into BetIndex’s collapse.

The Sheehan report, published in September 2021, laid bare how BetIndex failed to properly inform the GC about the nature of its product in its licence application, nor did the company notify the GC of changes to its product, which it was required to do.

The report also found that it took the GC more than three years to realise the product had altered dramatically from its original format and that the regulator had been keen for the Financial Conduct Authority (FCA) to regulate part, or all of, BetIndex.

Furthermore, Sheehan wrote that the GC could have responded better with earlier scrutiny of the product, including the language used by Football Index, while the regulator could have made quicker decisions.

While Football Index wasn’t regulated by the FCA, the report highlighted areas of improvement for the financial industry watchdog, including speed of response to requests from the GC and consistency of messaging on regulatory responsibilities.

Madders told MPs yesterday: “They [the FCA] took their time to get involved and were also indecisive, changing their view twice as to whether Football Index fell within their regulatory remit. 

“And on two separate occasions, in September 2019 and September 2020, when they did indicate that Football Index fell within their remit they didn’t follow up with any adequate action, and the product continued to be unregulated in a proper way.”

He also said Football Index was advertised as an investment product, “with only a small note squirrelled away on its website which actually said what it really was, a betting scheme”.

“While FCA regulation allows for redress for losses through the Financial Services Compensation Scheme, because this was considered gambling, although not overtly advertised as such, the attempted failures to regulate it mean that the losses continued and were allowed to stack up,” Madders said.

What was Football Index?

Launched in 2015, Football Index allowed customers to bet on the performances of footballers, with ‘dividends’ paid out according to a player’s performance on the pitch.

There were also ‘dividends’ paid for players’ ‘media buzz’. In other words, the level of press coverage they generated.

The name of the game was to spot rising stars of the footballing world and buy ‘shares’ in them in the hope that their value would rise so that the customer could cash out for a profit.

While the product was marketed as operating akin to a stock market, the reality was customers were placing three-year bets on player values increasing when they purchased ‘shares’ in the likes of Lionel Messi and Harry Kane.

Football Index blurred the lines between investing and betting as users ploughed hefty sums into the platform in the belief that this was akin to buying stocks and shares rather than gambling with a bookmaker.

TV adverts voiced by legendary football commentator John Motson, along with front-of-shirt sponsorship deals with Nottingham Forest and QPR, helped to legitimise the product and raise Football Index’s profile.

However, following a series of market crashes, BetIndex suspended operations in March 2021 and slid into administration as customers funds and ‘open bets’ vanished. 

The Sheehan report found that the GC had considered in February and March 2020 – a year before Football Index went under – warning that the product was a pyramid scheme and that the house of cards was on the verge of collapse.

Yet the regulator decided against it as there was no evidence that it was fraudulent and because “it was clear that existing customers were not making a profit purely from new customers joining the scheme”.

History repeating itself?

As part of the Westminster Hall debate, MPs also raised fears that individuals behind BetIndex and Football Index, including CEO Adam Cole, are reportedly involved in the upcoming launch of a new crypto football trading site.

The Times published a story earlier this month noting Cole is an investor and adviser in KiX, which referenced Football Index as a “proof of concept” in its pitch deck.

The newspaper said the founder of the startup, which uses blockchain technology, is Abdullah Suleyman, who was head of trading at Football Index.

Campaigns for the victims of Football Index described the emergence of KiX as a “real kick in the teeth”, while Madders said the people who created Football Index have escaped punishment for what he labelled a “scandal and a failure”.

“Nobody has been held to account for this [Football Index’s collapse]. Even those originally involved in the company have got away with it,” he said. 

SNP MP Patricia Gibson said KiX, which is inviting people to join its beta launch, bears “chilling similarities” to Football Index and that regulators needed to “keep a very close watch on this new product”.

Meanwhile, Twist commented: “Many of the victims from the original Football Index collapse are vulnerable and eager to recoup their losses by any means. And I fear that new platforms could prey on that vulnerability.”

KiX has stressed there is no link between its product and Football Index, while a spokesperson told The Times that Cole has no “executive input” and is “neither an employee nor a shareholder”.

The parliamentary debate heard how Football Index campaigners are calling for a slice of the money generated by gambling operator fines and settlements, of which there is a net surplus of £1.4bn since BetIndex was first licensed in 2015.  

They would like to see 10% of this sum used as redress for the money customers lost when BetIndex went into administration.

The post MPs: Gambling Commission’s failure to adequately regulate Football Index ruined lives first appeared on EGR Intel.

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