UK: Football Index offered unregulated product
The UK government has criticised the Gambling Commission for being too slow to react over Football Index.
UK.- The British government’s investigation into the collapse of the football player trading platform Football Index has found that the Gambling Commission was slow to act and was unaware that the operator offered an unregulated product for over three years.
The inquiry led by Malcolm Sheehan QC has found that the Gambling Commission (GC) was unaware of changes made to the type of product Football Index offered and the fact that it was operating on the wrong kind of licence.
It found that the operator BetIndex had not discloses its “go-to market” feature, which allowed players to sell shares to each other like on an exchange, during its application process for a fixed-odds betting licence.
However, the Gambling Commission subsequently reviewed the Football Index website twice before the platform went live and “had not picked up on” the feature.
BetIndex should have had an exchange licence, not a fixed-odds betting licence, the report states. As such the Gambling Commission had not properly regulated Football Index in relation to its licence during its first three years of operation.
The Gambling Commission only looked into whether the operator had the right licence after receiving questions about the product from the French regulator ARJEL.
The report found that the regulator “could have taken a stricter approach to BetIndex’s failure to seek a licence that matched the terms upon which it was to operate the Football Index product”.
The Gambling Commission was also slow to contact the Financial Conduct Authority (FCA) to check whether BetIndex’s product came under its remit. It only contacted the FCA in May 2019. The inquiry found that the FCA was also slow to reply and that neither regular knew which should take responsibility.
The inquiry was unable to determine whether the Gambling Commission could have prevented the collapse of the platform owing to the number of factors involved. However, it noted that the regulator had raised questions about the platform’s viability as early as February 2020.
Football Index collapsed in March 2021, days after slashing its dividends in a bid to remain afloat. The Gambling Commission was criticised for not intervening earlier, only suspending Bet Index’s licence once it entered administration. The regulator’s then chief executive, Neil McArthur, resigned soon after the collapse.
The Gambling Commission has defended its decision not to suspend Football Index’s licence earlier, arguing that it could cause more risk of financial collapse, something the inquiry recognised.
The UK’s new gambling minister Chris Philp said: “I’m extremely conscious of how devastating the collapse of Football Index has been on its many customers, which is why we moved quickly to launch this independent review. 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.”
Regulatory response to the report
The Gambling Commission and the FCA have announced a strengthened memorandum of understanding in response to the report, with frameworks aimed to avoid regulatory impasses. The FCA has appointed an executive director with responsibility for its relationship with the Commission.
Meanwhile, the Gambling Commission has updated its assessment frameworks and said it would undertake stricter scrutiny of the terminology used to describe products.
Interim Gambling Commission CEO Andrew Rhodes said: “No amount of explanation of what happened to Football Index will take away the justifiable hurt and anger its customers are experiencing having lost, in some cases, life-changing amounts of money when the gambling company collapsed.
“We accept and agree that we should have drawn a line under our efforts sooner, but this does not mean those customers would not have lost money in the event of the BetIndex company collapsing. Throughout this case, we sought the best outcome for consumers within the scope of our regulatory powers.
“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.”
The UK parliament’s All-Party Betting and Gaming Group (APBGG) has launched an inquiry into the Gambling Commission’s “competence and effectiveness” after receiving a number of complaints from the industry.
The group said operators had complained of cases in which the national regulator had overstepped its powers or acted outside of the Regulator’s Code. They have also questioned the Gambling Commission’s ability to function.
