New Documents Reveal UKGC Was Warned About Football Index
March 23rd, 2021 4.00pm
Following the Football Index crash, more and more documents emerge, revealing the football trading platform was described as a dangerous pyramid scheme and a catastrophe just waiting to happen.
The Guardian obtained the most important document related to the disgraced platform. Authored by a gambling industry expert whose identity wasn’t revealed, the report was sent to the UK Gambling Commission in early 2020. According to available information, it was later passed to the gambling watchdog’s executives.
The Whole Scandal Could Have Been Prevented
However, the biggest question is why the UKGC chose to ignore this document and failed to take any action whatsoever. The unnamed author provided a thorough analysis of the platform’s business model and pointed out rudimentary errors that made it completely unsustainable. The UKGC was advised to take immediate action in order to protect its customers.
Football Index was launched in 2015 and quickly became a visible brand in English football. It advertised heavily on television and radio, with many football clubs wearing its logo on their jersey, including QPR.
The platform resembled a stock market, allowing its customers to purchase and trade shares in professional football players. The value of a player would depend on his performances or value in the real-world football transfer market. Based on the performance of the shares they had, customers would later receive dividends.
However, Football Index made a shocking move earlier this month, after announcing it would drop its dividends by 80%. According to the company’s statement, this was done to make sure the platform remains sustainable in the long run.
But instead of providing sustainability, the move led to the market crash, slashing the value of shares. The site soon went online, while users were unable to withdraw any remaining funds.
What Did the UKGC Do?
The UKGC reacted on March 11 and suspended the license of the platform’s parent company, Bet Index. On the very same day, the firm went into receivership.
However, the regulatory body had plenty of time to take action. Documents show that the in early last year, the UKGC was warned that Football Index would have trouble in meeting its liabilities. According to the said document, the only way the platform could do so was through the constant sale of new shares to new customers.
The report explained that any sort of halt or decline in user growth would make the company unable to fulfill its obligations towards its members.
The most likely scenario Football Index was facing was a bank run. Only a certain number of users would be able to withdraw their funds before the whole system crashes, leaving the rest of the users without any money.
A number of lawmakers, including Labour MP Carolyn Hariss, have promised to take this question to Parliament. Some argue that the absence of any action from the UKGC shows the regulatory body is derelict in its duty to oversee the market and protect customers.
The UKGC later replied that although its duty was to check the sustainability and finances of an operator, its job wasn’t to monitor its business activities on a daily basis or oversee the licensee’s financial health in real-time.
The gambling watchdog further explained that customers using the services of gambling operators did so at their own risk.
And while it still remains unknown whether the football platform will face a government inquiry, its owners were looking to sell Football Index and salvage whatever they can. They even hired a financial advisory group to help them find a new investor, but with no success.
Many blame the regulatory body for not acting sooner