UK Government Releases Independent Football Index Report

In light of the collapse of Football Index in March this year, the UK Government announced that it would dig deeper into the matter. The main objective of this review was to examine how the Gambling Commission handled BetIndex, the operator of Football Index, from September 2015 when the company was awarded a gambling license up until its license suspension come March 2021.

Malcolm Shehan QC was tasked with leading the investigation in April 2021, and after over 5 months of the inquest, the full report and findings of the case were published earlier this month. Meanwhile, the UK Gambling Commission (UKGC) also conducted its own independent regulatory probe that is yet to be concluded.

As we speak, BetIndex Ltd is also facing administration proceedings to look into the operator’s assets and liabilities to potentially pay some amount of money back to its creditors. In June, the High Court of England and Wales in London ordered the company to reimburse some of Football Index’s former users a combined amount of about £3.5 million ($5 million).

What Did the UK Government Discover in its BetIndex Ltd Review?

In the review, the UK government also examined whether the UKGC considered the potential for Football Index to fall under the jurisdiction of the Financial Conduct Authority (FCA) as well. That’s because, through its 5-year plus stint in the UK, the BetIndex Ltd product was never regulated by the legislation of UK’s financial services. On this line of the inquest, the government found that:

• BetIndex failed to correctly inform the UKGC about the true nature of its Football Index product when applying for a gambling license. The operator did not update the Commission about changes it introduced to its novel product after launch as is dictated in licensing code of conduct.
• UKGC inadequately responded to the challenges that Football Index raised after launch. The regulator should have scrutinized the product earlier, right from the language it used, to make appropriate decisions faster, escalated the matter, and taken action sooner. 
• Even though the BetIndex product was never under the FCA’s oversight, the government has identified several areas where things would have been done better. For instance, the FCA should have responded faster to UKGC’s requests and messaged its regulatory responsibilities more consistently.

After the publication of the report, UK Gambling Minister Chris Philp said in part:

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“We have been clear that we must learn lessons to make sure a situation like this does not happen again. I’m encouraged to see the Gambling Commission and the FCA are taking concrete steps on an action plan on how they will better work together. 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.”

On top of the discoveries, the report has also asked whether more action needs to be taken to guarantee that gambling companies offering long-term bets have the capacity to cover the payouts. The question will be tackled in the Gambling White Paper that the UK government plans to publish later on.

UKGC and FCA Address Issues Raised in the Report

Following the independent UK government review, the UKGC and FCA have already started taking steps to improve how they’ll be cooperating in the future. For starters, the duo has drafted a Memorandum of Understanding that includes new routes for escalating matters. Through the new routes, regulatory impasses will be identified and dealt with more efficiently.

The UK gaming ombudsman has also updated its risk assessment framework to more aptly assess product novelty. Further, the UKGC has also made a new commitment to consult on tighter regulations for the terminology used to describe any gambling products licensed in the region.

For example, there has to be a clear distinction for consumers to let them know about the gambling nature of a product, rather than touting it as an ‘investment.’ Additionally, the FCA has nominated an Executive Director tasked with oversight of its relationship with the Gambling Commission. 

UKGC Reminds Customers that the Regulator Cannot Repay Football Index Funds

Apart from addressing the concerns raised in the Football Index report, the Gambling Commission has advised players who lost funds to go through the Begbies Traynor administrators appointed to handle the case. The said administrators are RH Toone, Adrian Rabet, and Adrian Hyde.

In an official video statement responding to the independent Football Index review, the recently appointed UKGC interim CEO, Andrew Rhodes, said:

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“In some industries, there are mandatory or voluntary schemes or compensation schemes which give some protection to funds in the event of a company collapsing. The gambling industry is not regulated like that – it’s regulated as a leisure activity. We always say nobody should bet more than they can afford to lose. Not because the company might collapse but because gambling is inherently risky. I realize this is no comfort to some of those who have lost life-changing amounts of money with the collapse of BetIndex. The best avenue for the recovery of funds is best pursued through the administrators.”

However, the Gambling Commission CEO acknowledged that, indeed, Football Index had received a license to be one type of gambling product, but the real product was completely different. It was supposed to be a fixed-odds betting platform where bettors get dividends but can’t buy or sell bets, but the actual product offered a stock market model which should have been operating with an exchange betting license. And as soon as the regulator realized this after an inquiry that it admits should have been faster, the platform’s license was suspended.

In another media briefing addressing the Football Index debacle, Rhodes said that:

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“In recent years, we have seen an increase in the complexity of business models and product offerings. The lines between what is gambling and other types of products, such as financial services or computer games, has become increasingly blurred and no longer neatly fit into existing statutory definitions of gambling… Our actions were always focused on trying to protect consumers while we sought to bring the operator into compliance with regulations. This does not mean, however, that those customers would not have lost money in the event of the BetIndex company collapsing.”