What went wrong with Football Index? We dig deep into the implosion of the soccer player-trading site where users are said to have collectively lost over £90m. UK MPs now call for a public inquiry as the region’s gambling regulator faces renewed backlash.
Football Index, the self-proclaimed stock market for footballers caused uproar for its users two weeks ago when the company decided to slash its share prices by up to over 80% leading to a market crash, effectively wiping up to £90 million ($125 million) off the shares in a split second.
The shocking notice came on Friday the 5th of March and the company said that new rules for dividends payouts would be introduced a month later, on Monday the 4th of April, drastically reducing the maximum daily pay from 33p down to a dismal 6p. While the gambling platform was trying to balance the scales as it had been racking up losses of late due to its unsustainable business model, such a severe adjustment on the earning potential would leave some customers facing impending losses of £200,000 ($278,000) or more according to The Guardian.
A week later, on 11th March, the company announced that trading was suspended due to the extreme crash and that it had entered into administration after an overwhelming public outcry. Some users of the platform who will possibly be facing terrible losses from the turn of events compared the situation to changing the position of the goal post halfway through a match. Through its parent company, BetIndex Limited, Football Index released a statement trying to shed light on the whole situation. The statement reads in part;
QuoteThe dividend restructure announced on Friday was a necessary step in a business recovery plan to seek the long-term sustainability of the platform. However, it is clear that this has not been well received and we need to find a more agreeable way forward. We are pursuing a restructuring arrangement to be agreed with our stakeholders including, most importantly, our community.
We are preparing this through an administration with insolvency practitioners Begbies Traynor, to seek the best outcome for customers with the goal of continuing the platform in a restructured form. The restructure could involve equity in BetIndex Limited being distributed to customers, board representation for customers, and a new management team put in place, along with other initiatives.
Launched in 2015, Football Index is or rather was a clever combination of fantasy sports and the stock market, touting itself as the ‘betting rebellion’ even though it was officially categorized as a gambling site, coming complete with an operating license from the UK Gambling Commission.
Gamblers, or traders as the company referred to its users, would buy and sell shares of real-world footballers (soccer players) just like trading on the stock market where the share value of players would increase and decrease depending on how many users are buying or selling a player’s shares. And similar to how fantasy football operates, the value or share price of each footballer on the site was pegged on the player’s real-life performance on the pitch. Through the 2019/2020 season, Football Index paid out over £11 million ($15.3 million).
In the wake of the dramatic cut of the user dividends, account balances are currently frozen and users cannot cash out their funds from the platform.
Gambling Licenses Withdrawn, BGC Membership Suspended, and Sponsorship Ties Severed
Following the suspension of trading on Football Index, the United Kingdom Gambling Commission moved to suspend the company’s operating license, and published a briefing on its official website about the matter saying;
Quote"The Gambling Commission has decided to suspend the operating licence of BetIndex Limited (t/a Football Index) pursuant to section 118(2) of the Gambling Act 2005. The suspension follows an ongoing section 116 review into the operator, as we had concerns activities may have been carried on in purported reliance on the licence, but not in accordance with a condition of the licence, and that Football Index may not be suitable to carry on with licensed activities. We have made it clear to the operator that as the investigation progresses, we expect it to focus on treating consumers fairly and keeping them fully informed of any developments which impact them."
Right after the UK gambling ombudsman revoked the operating license of Football Index, the Betting and Gaming Council, UK’s gambling industry trade body, mirrored the Commission’s actions by suspending the membership of the platform. Likewise, the Jersey Gambling Commission, the gaming watchdog where BetIndex Limited is based, suspended the gambling license of the company as well.
When it was still a darling of football fans across the UK, Football Index like many other popular gambling brands had also entered into shirt sponsorship deals with second-tier English soccer clubs, Nottingham Forest, and Queens Park Rangers. Now that things have taken a sour turn for Football Index which was popularly advertised as an investment platform, the two clubs have backed out of their shirt sponsorship deals with the scandal-plagued site.
The UKGC Comes Under Fire From UK MPs Yet Again!
Football Index’s fall from grace has somehow brought the UK Gambling Commission on the receiving end of lawmakers once again. Meanwhile a group of MPs is already calling on The Department for Digital, Culture, Media, and Sports (DCMS) Secretary to launch a public inquiry on the platform.
The All-Party Parliamentary Group on Gambling-Related Harms (APPG) on the other hand has penned a letter to MP Carolyn Harris, the DCMS chair to express their outrage of Football Index’s actions citing that on average, each gambler on the site will be losing an average of £3,000 ($4,120). The gambling site is reported to have more than half a million registered users and over 300,000 active users.
Further, both Harris and APPG members underscored the importance of the ongoing reform of the gambling sector as the UKGC failed to catch sight of the gambling company’s unsustainable business model. The APPG members said;
Quote“In a regulated sector, when people gamble, they should have the confidence they are doing so on the basis of the outcome of a wager. It should not be a gamble on the solvency or sustainability of the licensed operator. We are therefore calling on you to hold an urgent public inquiry into the events which allowed this to happen as well as the conduct and competence of the Gambling Commission.”
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