The UK Gambling Commission was warned that Football Index was doomed to a collapse of unmatched proportions greater than a 12 months earlier than the betting agency suspended its platform.
A report despatched to the regulator in January 2020 and obtained by The Guardian laid out issues over Football Index’s actions. The doc’s creator, an individual with intensive expertise in the net playing sector, argued that the UK-licensed betting agency’s enterprise mannequin appeared basically flawed and unsustainable and that’s potential failure may considerably affect the whole trade.
The report mentioned that the operator’s actions represented “an exceptionally dangerous pyramid scheme under the guise of a ‘football stock market’” and that the regulator ought to instantly warn and defend customers.
Launched in 2015, Football Index ran a sports activities betting platform that mimicked a inventory change by providing customers the chance to purchase shares in soccer gamers and earn dividends over the time period of their wager.
Users have been additionally capable of purchase and promote their shares between themselves. The agency charged a 2% payment on these transactions. Thanks to its somewhat distinctive enterprise mannequin and collection of promoting initiatives, together with advertisements throughout Premier League matches and a latest shirt sponsorship offers with Nottingham Forest and Queens Park Rangers, Football Index collected a participant base of roughly 500,000 bettors.
Over the previous ten or so months, the operator has skilled a collection of turbulences, the latest of which, and essentially the most critical one, occurring early this month when it introduced a revised dividend construction that slashed dividends by as much as 80%.
Punters reacted furiously to the in a single day adjustments which resulted in the Football Index market crashing. The firm suspended its operations and went into administration. The UK Gambling Commission suspended its license on March 11, saying “that was the first point where we had sufficient evidence to demonstrate that suspension was necessary.”
Football Index’s Product Fueled “Unparalleled Levels” of Irresponsible Gambling
The report that the Gambling Commission obtained early final 12 months famous that its licensee’s imitation of a inventory change resulted in “unparalleled levels of irresponsible gambling behavior” from tens of hundreds of consumers as they have been led to imagine they have been investing and never playing their cash.
According to the report, these punters had little or no data in any respect that they have been placing their funds in danger.
The report warned that the betting operator’s liabilities grew each time a punter bought a share and that in early 2020 its liabilities exceeded £1 million each month. It additionally famous that “the only way the company can afford this long term is through the constant sale of yet more new shares to new users alongside a constant churn in positions.”
The report concluded that ought to the expansion of the agency’s person base cease or the variety of new customers decline, it could “quickly find itself unable to pay these liabilities to users.”
The report’s creator additionally identified that this would depart the UK-licensed operator “vulnerable [to]
and destined for a bank run in which the first ‘X’ percent of users manage to get some money out before the system collapses and the remainder lose everything.”
Following Football Index’s crash earlier this month, hundreds of customers concern they may by no means recoup the cash they’ve invested.
News in regards to the regarding report and the UK Gambling Commission’s obvious data of Football Index’s unsustainable enterprise mannequin emerge because the regulator is topic to damning criticism that it didn’t act correctly because the scandal unfolded. A number of days in the past, the company’s boss stepped down from his function, though it was introduced his departure was unrelated to the problem.
Source: “Football Index: Gambling Commission was warned about firm in January 2020”, The Guardian, March 18, 2021