According to media reports, the UK Gambling Commission (UKGC) received a warning in January 2020 that Football Index, the gambling operator that got its licence suspended a week ago, was a fraudulent pyramid scheme that operated masked as a football stock market. As revealed by The Guardian, at the time when this information was revealed to the gambling regulatory body, the UKGC was called to immediately take urgent action into the operations of the gambling platform in order to inform and protect the company’s users.
Football Index started offering its services in the UK in 2015 under an operating licence issued by the country’s gambling watchdog, the UKGC, rather than the body that regulates investment products, the Financial Conduct Authority (FCA). The operator provided its customers with the chance to purchase what it classified as shares in top football players and to get dividends over their wager’s 3-year term. Furthermore, Football Index users were also allowed to purchase and sell shares from and to other players, with a 2% transaction fee being charged by the company.
According to estimates, the company managed to boost its customer base to about 500,000 users following an aggressive marketing campaign. However, the company has faced some concerns regarding its business model that was rumoured as unsustainable. At the time, the weir gambling industry has warned its failure could have extremely negative effects on the entire sector.
Football Index Offered Imitation of Investment Product Lying to Consumers, Report Says
The Guardian revealed it has received access to a document that was received by the UKGC in January 2020, with the document analysing the business model used by Football Index in detail. As reported by the UK media hub, the document’s author was a person with years of experience in the sector who raised a red flag about a number of significant defects.
The report suggested that Football Index had intentionally offered an imitation of an investment product, which has made tens of thousands of people behave irresponsibly after being misled into believing they are actually not gambling but making an investment while putting their money at risk.
The report also alarmed the UKGC that the dividends Football Index was supposed to pay on shares over a bet’s 3-year term would increase whenever a share was bought. Last January, the author of the report estimated that the only possibility for the operator to afford such liabilities in the long-term is through the constant sale of more and more new shares to new customers and if this trend stopped, then the company would not be able to pay these dividends to users, too.
According to the information sent to the UK gambling regulator at the time, the report findings basically meant that Football Index would be vulnerable to financial losses and a bank run in which only a limited number of consumers would be able to get some money out before the entire system used by the operator collapses, with the rest of the customers losing everything.
As understood by The Guardian, the document has been presented to the UKGC staff in person and then sent via email to senior executives. The warning came more than a year before the recent collapse of Football Index, and what is more important, it was made at a time when the betting platform still allowed its users to cash out by selling shares back to the company by using the instant sell option. That option became unavailable in March 2020.
The UK gambling regulator suspended the operating licence of Football Index as of March 11th, 2021. The watchdog said it took the measure at the first point when it had enough evidence that proved that such a step was necessary.
- Author
Daniel Williams
