The collapse of Football Index has been one of the biggest talking points in the UK gambling industry over the past year, with the actions of the UK Gambling Commision (UKGC) coming under public scrutiny.
Occurring in March, Football Index – and by extension its parent company BetIndex – was forced to enter administration after suffering a massive withdrawal of customers following its decision to slash dividends on players by 13p to 8p.
BetIndex’s UKGC, Jersey Gambling Commission (JGC) licences were subsequently revoked, and its membership of the Betting and Gaming Council (BGC) was also suspended.
The company functioned by allowing bettors to buy and trade ‘shares’ in active football players, with a players value increasing depending on their on-pitch performance throughout a season.
Speaking in a recent video release, Andrew Rhodes, CEO of the UKGC, shared his views on why Football Index collapsed, and detailed what changes the regulator has made to its practices as a result.
“During the operating life of Football Index, nearly £200 million was withdrawn or paid out to customers, but Football Index was reliant on one sport only, and subset of that sport, and when the cornovarius pandemic hit, that sport stopped,” he explained.
“This made it very difficult for Football Index to attract new customers, but it still carried on paying out its dividends – in fact it increased its dividends, and that put an enormous strain on the company.
“Ultimately, without enough customers joining and paying out higher and higher costs, the company was simply unable to continue.”
Following Football Index’s decline, the UK government commissioned an Independent Review, which has made a number of recommendations to both the UKGC and the Financial Conduct Authority (FCA).
In response, the UKGC revealed that it would factor in ‘novel products’ when making assessments of operator risk, introduce ‘tighter rules for the terminology used to describe gambling products’ and strengthen its Memorandum of Understanding with the FCA.
Rhodes commented: “We already have the Gambling Act review, which will look at our powers and also look at the way the gambling industry is regulated in the UK.
“Much sooner than that we have already taken steps around our enforcement approach to resolve cases more quickly and to focus more on complex and unusual products to make sure we have the right approach.”
A common criticism of the UKGC’s handling of the Football Index situation over the past year has revolved around the regulator’s oversight of the company’s operations, and why it was licenced to conduct business in the way it did.
The Commission faced substantial criticism earlier this year when it was revealed that it had been warned, via letter, one year previously about Football Index, which the whistleblower in question likened to a ‘pyramid scheme’.
“As the report says, we did not licence Football Index to sell bets between users to between the company and users,” Rhodes explained.
“The product that we licensed was one where customers could place a bet on the future of a given football player, and be paid dividends based on the performance of that football player.
“Those dividends might reach the value of the original bet, or they may not, but that was the product that we licenced – we did not licence a product for the sale of bets – known as shares – between users.”