Getting to the bottom of the issue
The UK government is setting up an independent review into the Football Index collapse earlier this year and the UKGC’s handling of the situation.
Minister for Gambling and Lotteries John Whittingdale confirmed on Tuesday that the UK government will be launching an independent review into the circumstances surrounding the scandal. The government has not yet appointed the independent expert who will be leading the investigation into the “football stock market” platform that folded in March.
The expectation is that the findings will be available during the summer and act as evidence for the government’s continuing review of gambling legislation. A white paper that outlines the findings and proposed reforms from this legislative review will be ready before the end of the year.
operator ultimately lost its UK Gambling Commission (UKGC) license and fell into administration
Football Index was in operation since 2015 before it collapsed in dramatic fashion last month. The operator ultimately lost its UK Gambling Commission (UKGC) license and fell into administration, endangering about £90m ($125.4m) of customer funds.
The independent review will look as far back as September 2015 and up to March 2021.
Concerns about the UKGC’s role
Minister Whittingdale’s confirmation comes after the call earlier this month by cross-party MPs for an inquiry into the matter, in an attempt to figure out what exactly went wrong.
Particularly, the UKGC has come in for a lot of flak over its handling of the scandal. Its role in the matter will also be under investigation by the review team. Some have claimed that the gambling regulator was “asleep at the wheel” as it received a warning about concerning issues within Football Index as far back as January 2020.
gambling regulator was “asleep at the wheel”
The warning outlined that Football Index had estimated monthly liabilities of more than £1m ($1.4m). This “exceptionally dangerous pyramid scheme” would struggle to pay back its liabilities if user growth stopped or declined. It took until May 2020 before the UKGC started a formal review into the operator. Following its investigation, the commission said it did not find any grounds to suspend the platform’s operating license.
Shortly after the scandal erupted, UKGC chief executive Neil McArthur resigned suddenly from his role after nearly three years in charge.
Response to the new review
A UKGC spokesperson welcomed the news of the independent review and the focus it is likely to place on the current regulation of “complex products” that have both financial and gambling elements. The spokesperson said: “Alongside other regulators, we look forward to fully engaging with the review. Our own regulatory investigation is continuing and will not be adversely impacted by the review.”
The Betting and Gaming Council (BGC) also received the news positively. The UK gambling industry body outlined concerns about how the UKGC had information about possible issues with Football Index’s business model as far back as the beginning of 2020.
The collapse of Football Index
The Football Index platform allowed customers to buy shares in specific professional soccer players. Share prices would rise and fall depending on recent player performances, which would also dictate the cash dividend payments that the holder of the shares would earn. Platform users could get a dividend for as much as £0.14 ($0.20) per share on a daily basis.
While many had concerns about its business model, Football Index was able to operate for the last six years. The first inklings of a major issue came on March 5, after the operator announced it would be dropping the max dividend per share to £0.03 ($0.04) as a result of financial issues. The planned change was not enough to save the business, which went into administration on March 11.
Potentially costly for customers
While BetIndex has stated that customer funds were in trading accounts that were separate from the operator’s funds, it could not guarantee that all of the money would be repaid in the case of insolvency. Speaking to the BBC, one person revealed being out of pocket by about £20,000 ($27,869) as a result of the Football Index collapse.
Some platform users have been looking at pursuing legal action in an attempt to recover their funds. Last week, BetIndex announced the opening of an online claims process for customers to inform BetIndex and the administrators how much money they are owed.