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Liz Twist (Blaydon) (Lab)
I beg to move,
That this House has considered the impact of the collapse of Football Index.
It is a pleasure to serve under you as Chair, Ms Ghani.
Football Index was a platform that allowed customers to create, buy and sell bets to one another as a means of making money, but it was, or was presented as, so much more than just betting. The “go to market” option on the platform allowed users to buy and trade with one another, creating an exchange market for customers. Due to the nature of the product, from its launch in 2015 it was advertised to customers repeatedly by Football Index as
“the world’s first football stock market”,
leading many to believe that this was more than just simple gambling and that it was a way of using their knowledge of football to grow a portfolio and make money. And on paper, in the early years, some did.
The collapse of Football Index has really damaged many customers. We have only to look at the tip of this iceberg to see stories from individuals who have lost so much as a result of the failings surrounding the company. The issue is more than money, vital though that is. The situation has also had an impact on many customers’ mental health and wellbeing. Despite the report published by Malcolm Sheehan QC in September 2021, there are still many unanswered questions, leaving the thousands of people affected without answers. This must be addressed to ensure that they have the answers they need. We must also, crucially, look again at the regulatory failing that allowed the situation to come about.
Sir Greg Knight (East Yorkshire) (Con)
I congratulate the hon. Lady on securing the debate. Is she aware that in the previous Session of Parliament there was an early-day motion on this subject? It was tabled on 25 November by the right hon. Member for Knowsley (Sir George Howarth), who I see is in his place, and it called on the Government to implement the recommendations of Malcolm Sheehan QC, but it concludes by saying that it
“further calls on the Government to do all that it can to ensure that those owed money receive full reimbursement.”
Does the hon. Lady join me in supporting and repeating that request today?
Sarah Owen (Luton North) (Lab)
I thank my hon. Friend for giving way on the point about fairness and justice. My constituent, Mr Murphy, lost £7,000 following the collapse of Football Index. Unbelievably, all that he has had back so far is £81, but for him and constituents like him, it is not about the money; it is justice that they want and deserve. He wanted me to say that he said this:
“I want the Directors responsible to be made accountable for their actions…I have seen nothing from the Government in terms of redress for customers or even how something like this can be prevented in the future.”
Does my hon. Friend agree that the Minister needs to tell us how this will be prevented from happening again, and what justice people can expect?
Liz Twist
I certainly agree and will touch immediately on the issue of redress. As I was saying, the issues identified must be addressed to ensure that those affected have the answers they need and we must look again at the regulatory failing that allowed this situation to come about. Tens of thousands of customers had—and lost—more than £124 million in the system at the point of its collapse. Of course the question of redress must be revisited, as hon. Members have already said, because the clear failings of the regulations applied to BetIndex Ltd, a subsidiary of Fame Ventures Ltd, have left many people in a difficult position.
The Sheehan report, as we have heard, highlights a range of issues about the regulation of the product; it highlights several failings by both the Gambling Commission and the Financial Conduct Authority. It sets out that from early in the life of Football Index, the product was not regulated correctly and the platform’s “go to market” function was not notified to the Gambling Commission. However, it states that the Gambling Commission had reviewed the product twice and this was not noted in the reviews carried out, meaning that Football Index was given its licence and launched without any consideration of one of its two main features. At that point, it was already clear that the Gambling Commission should have done more to protect the rights of customers. Given Football Index’s likeness to an exchange or a market, the Gambling Commission should have notified the Financial Conduct Authority.
The Sheehan report also states that the Gambling Commission became “fully aware” of the issues with Football Index in 2019, but it still allowed customers to put money into the platform, meaning that customers lost even more money because of the commission’s inaction.
In 2019 the Gambling Commission referred Football Index to the Financial Conduct Authority, and in September that year stated that Football Index should be authorised by both the FCA and the GC. Despite that, again nothing was put in place. Clearly, the failings allowed customers to bet more and more into a platform that was not correctly regulated. Now, in the aftermath, people are having to deal with the fear that they may never get back the money that they put into the platform. The life-changing impact that could have on some individuals is clear.
Bell Ribeiro-Addy
I thank my hon. Friend for giving way and for making such a brilliant speech on an issue that has affected so many of our constituents. At the end of last year, I met my constituents who are victims of the Football Index collapse, and they shared with me details about the impact that the collapse has had on them financially. However, what they spoke about in most detail was the emotional impact and the damage to their mental health. Some felt ashamed or guilty for getting family members to invest and lose money in Football Index as well. Securing redress for the victims of the Football Index collapse is about more than just financial redress; it is also about giving them justice, given the emotional and psychological damage that the whole incident has caused. Does my hon. Friend agree?
Clive Lewis
I thank my hon. Friend for giving way, and for making such a powerful speech and securing this debate.
I wanted to intervene at this point, when my hon. Friend is talking about the regulatory framework, because it has comprehensively failed my constituents, many of whom have been suicidal. The collapse has led to them losing their homes or their businesses. The FCA failed them, Football Index failed them and the Gambling Commission failed them.
The Government have ruled out financial redress. Would my hon. Friend say that, in the interests of justice —indeed, if justice is to be done—and in the interests of our constituents’ wellbeing, the Government must look at financial redress again?
Liz Twist
I most certainly agree. It is one of the asks that I will make of the Minister later. I will try to speed up, because I am aware that so many Members want to speak.
I have made the point about the regulators and the fact that, in effect, Football Index was allowed to operate as a stock market where people traded stocks. I will now talk about the experience of people such as Chris and Collin, who are my constituents. They have given me permission to share their experiences. They told me about the difficulties the collapse has caused in their lives. Chris was saving up for a wedding and now has limitations on what he can afford. He said that Football Index
“was advertised as a great way to invest and buy shares, it was shown to be a better way to save compared to the rates banks offer. The loss of the £13,000 has limited certain aspects of what we can afford now.”
Collin also lost an incredible amount of money through this regulatory failing, which has had a direct impact on his mental health. As a result, he spent months unable to work, because of the stress and depression caused by the collapse. He told me:
“I feel a massive sense of guilt and anger that a huge amount of my family savings has been stolen. That money could have been used for my children’s future, house improvements, holidays and other investments.”
That comment again touches on the issue of regulatory failing. Football Index was able to sell itself as the “football stock market”; the language used was very public and the company even sponsored football teams high up in the Football League system. Allowing customers to believe that was incredibly misleading. The Gambling Commission and the Financial Conduct Authority should have stepped in long before they did. Their failure to understand a licensed product led to Collin, Chris and many other people across the country losing thousands of pounds.
On 17 May, I wrote to the Minister about the experiences of my constituents, and fortuitously, I received a response to my letter yesterday by email. The Minister noted that the Gambling Commission and the FCA have acted on the recommendations of the Sheehan report, so there is clearly a recognition that there was a failure in the regulation of the product. It is clear that the regulators have failed many people, like Chris and Collin, and they and I believe that they should be compensated in some way for that failure. The Sheehan report itself admits that it was
“produced under significant time constraints”
and could not provide
“as full responses…as possible”
to the issues, yet even from that condensed outline of the issues, it is clear that the regulatory failings have cost thousands of people dearly.
I welcome the gambling White Paper announced by the Government, which will seek to better regulate the market, better protect customers, and learn the lessons of this failure. However, that is simply not enough for the tens of thousands affected by the collapse of Football Index—those who have lost such great amounts of money, who are worried about telling loved ones about lost savings and growing ever more pessimistic about the Government’s handling of the matter. Those people simply want one thing: justice. On a number of occasions, the Government have stepped in when regulators and companies have failed to ensure that people are protected, so my constituents and those of other hon. Members ask, “How is this situation different?”
The Football Index action group has repeatedly asked the Government to do more to seek redress for those affected, and is willing to discuss that request with the Government and work with them to find a solution that will work for the people affected. As such, my first ask is whether the Minister will commit today to a meeting with the Football Index action group and myself to further discuss these outstanding issues.
It is clear that the failings that surrounded Football Index were severe, and the impact they have had on people’s lives will be lifelong. For that reason, those affected deserve the answers they need to move on from the situation. Will the Minister commit to another, more in-depth report, or would he be supportive of an inquiry into those regulatory failings to show that the Government and Parliament support those affected, and want to work with them to find the crucial answers that those people need?
Since the collapse of Football Index in March 2021, the regulatory failings have become clear, and the tens of thousands of people affected have lost huge amounts of money to this scandal. For them, we need to do more than learn the lessons and look forward; we need to find answers, and compensate where possible. My final ask is that the Government look again at bringing forward a redress scheme for the victims of Football Index. My constituents Collin and Chris, who have been hit hard by their losses as a result of regulatory failings, and all the other people affected across the UK, deserve answers and redress.
Ms Nusrat Ghani (in the Chair)
Due to the huge interest in the debate, the Minister’s time will be reduced to five minutes; the Opposition spokespersons’ time will be reduced to three minutes; and Back Benchers will have two minutes. My apologies, but that is the only way I can get you all in.
Aaron Bell (Newcastle-under-Lyme) (Con)
It is a pleasure to serve under your chairmanship, Ms Ghani, however brutal the time limit may be. I congratulate the hon. Member for Blaydon (Liz Twist) on securing this important debate and setting out the case so clearly—I will not do so again, given the time limits. I draw the attention of the House to my entry in the Register of Members’ Financial Interests, and let people know that I worked for Bet365 for 15 years before I came to this place. I have long experience of the Gambling Commission, and while I was in that role, it was frequently behind the curve and asleep at the wheel, which is one of the accusations levied at them regarding Football Index. In a period during which the gambling landscape was incredibly innovative, too many firms went bust with ante-post liabilities, too many punters lost money, and there was too little redress for people. Sadly, that is again the case today.
Ms Nusrat Ghani (in the Chair)
Order. Mr Bell, because some people have left the room, we have now increased the time limit to three minutes for you.
Aaron Bell
That is incredibly kind, Ms Ghani. Thank you very much.
This is a particularly egregious case. Five constituents have written to me about it; I will not name them, because I do not have their permission to do so, but a number of them have lost thousands of pounds. In this case, the Gambling Commission failed to identify the key features of the product, which then changed while Football Index was running it, and the Gambling Commission did not seem to notice. Andrew Rhodes, who I believe is a good man—I will come to that in a bit—said in his response that the Gambling Commission does not believe it licensed a Ponzi scheme. That may not be the case, but he also said,
“BetIndex was not recruiting enough customers to compensate for depleting its financial position”—
as it did by increasing the dividends—
“and ultimately collapsed as a result.”
If such a company is not recruiting enough customers to pay out the ones it already has, that looks like a Ponzi scheme to me.
It is clear that the ultimate blame lies with the operator. We have already heard a call for the directors be held to account, which I absolutely support, but we must be better at protecting people, as a Government and as a state. As I said, I have five constituents involved. I support what the hon. Member for Luton North (Sarah Owen) said about people wanting restitution and justice as well as compensation.
I am also very concerned that these people are vulnerable in other ways now. Football Index is finished, but there are other online products out there that, in my opinion, share some of the same characteristics. They are attractive to young men, in particular, because they look like get-rich-quick schemes. I am thinking of the crypto space and the various coins that are designed to be pumped and dumped. If people get in at the right moment they can make a profit, but if they get in too late they might lose their life savings.
Similarly, there is this ridiculous craze for non-fungible tokens, which, to their eternal shame, many football clubs and sports stars have endorsed. This is completely deplorable. I do not think those are regulated at all. Perhaps we can do something about that through the Online Safety Bill. I know that the Gambling Minister is busy with the Online Safety Bill Committee today, and I welcome his substitute, the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), who used to be my Whip.
This situation mostly affects young men. I believe we owe them a duty of care. My five constituents—all young men—believed, because they saw the kitemark, that the Gambling Commission understood, and almost endorsed, the product. Obviously it did not. If we license these sorts of products, then we ought to be standing behind them. We are not standing behind them now, as they are struggling to get any sort of compensation at all, although there is obviously an administration process going on.
I am sure that everyone here will have constituents who have suffered as mine have. We owe it to them to get to the bottom of this and give them some restitution. I will yield my final 20 seconds.
Jessica Morden (Newport East) (Lab)
I congratulate my hon. Friend the Member for Blaydon (Liz Twist) on securing a debate on a scandal that has caused much hardship. Constituents in Newport East have been among those who lost life-altering sums of money when Football Index collapsed last year. Some £124 million-worth of bets that were placed by customers in full trust with a company that was licensed by a UK regulator have all but disappeared. The scale of this loss is nothing like the sector has seen before. Hon. Members were right to say that individuals have been driven to the brink of suicide, marriages have collapsed, families have been affected, and life savings for weddings, houses and retirements have vanished. Over a year on, they are still dealing with scars on their mental health and finances, which has been reflected to me by constituents.
My hon. Friend the Member for Blaydon was right to stress that Football Index was not an ordinary gambling firm. It modelled itself as an investment package, and in an utter failure of regulation by the Financial Conduct Authority and the Gambling Commission, customers felt wrongly assured that their long-term investments in the index were secure. The Gambling Commission was aware that these investments were more risky than customers thought. The Sheehan review said that it was an “exceptionally dangerous pyramid scheme”. One constituent pointed out that Football Index took in a significant amount of capital at the beginning of the pandemic, and that its aggressive use of capital and failure to maintain a liability reserve to meet those investment obligations led to the rapid deterioration of the business.
The distinctive nature of Football Index also meant there was confusion, as has been mentioned, as to whether it was a gambling product under the remit of the Gambling Commission or a financial product under the FCA. The fact that there were unresolved discussions between the two authorities about co-regulating Football Index shows that there are still gaps in the framework, which seemingly enticing new business models can fall through. The Government need to iron this out.
There are serious questions for the FCA to answer. It twice stated that the product fell within its regulation, yet seemingly changed its mind. The Government should now look at the feasibility of a compensation scheme for the victims, using the precedent set by the collapse of London Capital & Finance, as well as securing proper redress for those who have lost so much. The Secretary of State should also ensure that the alarming regulatory failings that allowed this to happen are never repeated.
Sarah Green (Chesham and Amersham) (LD)
It is a pleasure to serve under your chairmanship, Ms Ghani. I congratulate the hon. Member for Blaydon (Liz Twist) on securing this debate on such an important issue. It is one that has caused a great deal of suffering.
The story of Football Index is one of regulatory deficiency, misunderstanding and failure by Government bodies to work together in the best interests of consumers. The Gambling Commission’s chief executive officer, Andrew Rhodes, said himself, in his September 2021 response to the inquiry into BetIndex:
“The lines between what is gambling and other types of products, such as financial services or computer games, has become increasingly blurred and no longer neatly fit into existing statutory definitions of gambling.”
Put simply, the lines were blurred and consumers trusted the product because it was licensed by a UK regulator.
However, the key issue is that the Gambling Commission did not have a firm grip of what it was licensing. Football Index managed to slip through the cracks between the Gambling Commission, the FCA, the Advertising Standards Authority and other bodies. The nature of the product meant that nobody was really sure who was responsible for regulating it, so nobody took full responsibility. While the Gambling Commission and the FCA sat on their hands, deciding how to deal with this new and unfamiliar product, vulnerable consumers were falling victim to Football Index’s misleading product and losing life-changing sums in the process.
One constituent told me they had lost £13,000—a sum totalling the majority of their life savings. Another has lost £50,000—a loss made even more sickening by the fact that their interactions with Football Index did not start until June 2020, long after the deficiencies had been exposed. I am sure that I do not need to explain the impact that losses of that magnitude have had on their mental health.
I know that the gambling White Paper is due to be published, and I hope that the proposals will strengthen consumer protections, the lack of which has cost Football Index customers millions. We must ensure that action to protect consumers from such schemes can be taken earlier, so that people do not continue gambling on a product that should not have been licensed. We need reassurance that the deficiency in regulation that allowed Football Index to slip through the cracks is remedied.
Finally, I agree with those who have said that we must ensure that customers receive compensation. Government regulation and licensing failed these consumers; the Government should do all they can to ensure that those owed money receive full reimbursement.
Justin Madders (Ellesmere Port and Neston) (Lab)
It is a pleasure to see you in the Chair, Ms Ghani. I congratulate my hon. Friend the Member for Blaydon (Liz Twist) on securing today’s debate. As we can see, it has been very well attended.
This issue has been described as the biggest scandal in British gambling history, with thousands of customers facing cumulative losses of up to £124 million. However, I think that describing it purely as a gambling scandal does not really show any empathy or understanding about the magnitude. Comments such as those attributed to the Gambling Commission—that people should not gamble more than they can afford to lose—fail to acknowledge this was not like putting a tenner on the 2.20 at Chepstow. Football Index promoted itself as an investment, with “guaranteed yields” in a highly regulated environment, and no bets have actually been lost, of course; the money was effectively stolen.
I have a constituent who has lost a six-figure sum, and some people’s losses are into seven figures. Individuals have been driven to the brink of suicide, marriages have collapsed, families have been torn apart, and life savings for weddings, house deposits or retirements have all vanished. This was not about people chasing their losses; it was money that was supposed to have been invested and was then wrongfully taken. While there has been a Government review—and, of course, promises to do better next time—there has not been justice.
Football Index has been described as a Ponzi scheme, and we now know that its executives were warned soon after its launch, as early as 2016, that its so-called stock market would prove to be unsustainable. Proposals to make the index more stable were actually rejected because of concerns about the possible impact on revenue. That all occurred some five years before Football Index’s eventual collapse, leaving serious questions about the effectiveness of its regulation.
According to newspaper reports, the Gambling Commission was warned in January 2020 that Football Index was
“an exceptionally dangerous pyramid scheme under the guise of a football stock market”.
Has the Minister spoken to the Gambling Commission about this? What did it say? What conclusions has the Minister drawn following this?
Aaron Bell
I am grateful to the hon. Gentleman for giving way because it allows me to make a point that I should have made in my speech. I believe that the new CEO of the Gambling Commission, Andrew Rhodes, understands the problems that occurred in the past. I met him in February to discuss this case and my overall experience with the sector. I think he accepts that mistakes were made repeatedly under the previous leadership of the Gambling Commission. I wanted to put that on the record and I thank the hon. Gentleman for giving me the opportunity to do so.
Justin Madders
I am sure that we will all note that improvement in regulation. It has been a failure; that is implicit from what has been said. It reminds me a bit of the leasehold scandal. People expected products to be sold in a safe way—these were similar, life-changing sums of money—and they have been found not to be secure.
We need some concrete assurances that the blurred lines, as we have heard, are not going to cause problems in the future and that there is going to be a clear delineation of responsibility for regulation in the future. We know from what a former employee said that senior management were warned back in 2016 that there was a problem, but the company continued to take money from people in that way for another four years. I want to know what has happened to those people in charge of the company. What sanctions have been issued against them? Are they fit to be involved in any businesses at all? That is a serious question that needs answering.
In conclusion, as we have heard, the lines between what is gambling and what are financial services are increasingly blurred. Nothing fits into a neat statutory category anymore. What is clear, however, is that there need to be proper protections and regulations for our constituents so that something like this never happens again.
Alison Thewliss (Glasgow Central) (SNP)
I am glad to have the opportunity to speak in this debate on behalf of a number of constituents who were affected by the Football Index scandal—in particular, two gentlemen called Marc and Andrew. Both invested significant sums of money in products that they believed were safe because they were regulated. Marc has made it clear to me that he is not a gambler and has never so much as put on a bet. He got involved with this because he was reassured that it was a regulated product. He thought it was safe and looked into it before putting any money in. He put his money in gradually and did not put it all in in one big lump sum because he was reassured by the regulation that existed. It was sold very much as an investment opportunity based on football knowledge. Given the sums of money that have been lost here—we are talking life savings; tens of thousands of pounds—it really does feel quite woeful that the Government are not stepping in to provide some form of redress.
It is clear that the company was still trading and attracting new customers even when concerns had been raised, to the detriment of many people who invested in good faith during that period. It was batted back and forth between the Gambling Commission and the FCA and, in a clear case of regulatory failure, neither was willing to take full responsibility for a product that should not have been licensed if nobody quite understood what it was for. The Government need to explain why those who lost out as part of the London Capital & Finance scandal have been entitled to a compensation scheme, but not those who have been affected by Football Index. For many, the sums of money involved are much the same, as are the failures of regulation.
I spoke to Marc on the phone last week and he has been left absolutely devastated by this. He and his wife separated for a while. He is still suffering from depression and anxiety, and he is on medication as a result. He feels very let down by the regulators, who should have kept him and all the others in this scheme safe. There is a big gap here. The Government may well say that they will learn from this, they will go forward and it will not happen again, but that is simply not good enough for my constituents. They should not be collateral damage in a regulatory failure. They deserve recompense, because the regulators who ought to have protected them failed in their duty to do so.
Ruth Cadbury (Brentford and Isleworth) (Lab)
It is a pleasure to serve with you in the Chair, Ms Ghani. I also want to thank my hon. Friend the Member for Blaydon (Liz Twist) for bringing this debate and to acknowledge the excellent contributions we have heard so far.
The £124 million spent on the Football Index scandal was not lost—it did not disappear down the sofa and it did not fall out of a purse. It was taken in a business model that was rightly described by the hon. Member for Newcastle-under-Lyme (Aaron Bell) as a Ponzi scheme. A scheme that was allowed to happen because the Gambling Commission and the FCA failed in their duty to regulate gambling firms and protect consumers, and the Department for Digital, Culture, Media and Sport did not act when warned.
The Gambling Commission was told on many occasions, and certainly by somebody who knew the business back in January 2020, that the Football Index was deliberately imitating an investment product and that it was leading to users
“believing that they were investing rather than gambling”.
People were conned to bet—sometimes tens of thousands of pounds, and even six-figure sums, as colleagues have already mentioned.
Sir George Howarth (Knowsley) (Lab)
The recurring theme throughout this debate has been the regulatory failure that my hon. Friend refers to. Does she agree that in such circumstances the Government are the only organisation that can put it right?
Ruth Cadbury
My right hon. Friend is absolutely right, and I will come to that point. As I say, there were various stages. The Gambling Commission took over a year to withdraw the licence and say that Football Index’s product was an exceptionally dangerous pyramid scheme under the guise of a football stock index. By submitting a written question to Ministers, I found out that it then took over a year for the Gambling Commission to warn the Department for Digital, Culture, Media and Sport. It was not until 10 March 2021 that a letter went from the Gambling Commission to DCMS. In that year, a gaping black hole existed, and through that black hole went the hard-earned savings of my constituents and those of many others. Millions of pounds went down that black hole.
As hon. Members have said, there is a wider point. The scandal points to yet another failure of financial regulation in the UK. The FCA was set up to protect consumers, but we saw that it failed to act over the collapse of London Capital and Finance, which affected other constituents of mine, and many other schemes have taken people’s hard-earned savings. The FCA needs to be strengthened, because we cannot have a financial regulatory regime that is effectively a Potemkin village that exists in name but takes no real action and does not do enough to warn people about scams. My constituents, and the thousands who have been conned out of their money, deserve better than this.
Mick Whitley (Birkenhead) (Lab)
It is a pleasure to serve under your chairmanship, Ms Ghani. I thank my hon. Friend the Member for Blaydon (Liz Twist) for securing this important debate.
The collapse of Football Index in March 2021 left a trail of human misery in its wake. Some £90 million-worth of open stakes has vanished, with an average loss of £3,000 per customer—a life-changing sum for anyone. For some of the people I represent, however, those losses have been far greater still. I have heard from pensioners whose entire life savings have been snatched away, and from constituents who lost more than £100,000 when the platform collapsed. My constituents are not stupid, and nor are they gamblers whose luck simply ran out. They are victims of an unscrupulous, if not outright criminal, scheme that wilfully misled the Gambling Commission, pedalled lies about the state of its financial health, violated the terms of its licence and cynically preyed on fans’ passion for the beautiful game. They deserve so much better than the condescension that has accompanied Football Index’s demise.
Few have been quite as tone-deaf as the chief executive officer of the Gambling Commission, Andrew Rhodes, who had the temerity to lecture victims still coming to terms with their losses by saying that
“no one should gamble more than they can afford to lose.”
In fact, Rhodes and the commission he oversees still have serious questions to answer about their role in this whole saga, because if this is a story about unchecked greed, it is also a story of chronic regulatory failings. The Gambling Commission issued a licence for a product that it did not understand, and ordinary customers were forced to pay the price. Despite receiving warnings about systemic flaws with the index in January 2020, it was not until May 2020 that the commission began investigating. In that time, Football Index signed a sponsorship deal with Queen’s Park Rangers, lending further legitimacy to this elaborate pyramid scheme.
The simple truth is that thousands of Football Index consumers were failed by the very people who were supposed to protect them. My constituents now deserve justice, but despite the publication of the independent review in September last year, it still seems to be a long way away. Successive announcements by both DCMS and the Gambling Commission that no compensation will be made available will come as a bitter blow to people living in my constituency, whose lives have been changed irrevocably as a result of the collapse, and the continued existence of platforms seemingly mimicking Football Index’s business model—including AllStars Trader, which is run by a former Football Index employee —shows that not nearly enough is being done to stop the catastrophe repeating itself. The fact that Football Index was allowed to trade without any oversight from the Financial Conduct Authority, despite styling itself as a trading platform, shows just how badly regulatory reform is needed.
Football Index was not the only app that encouraged ordinary people to hand over small fortunes with the promise of massive returns. In recent years we have seen a massive upsurge in a number of online trading platforms becoming available to ordinary people, such as eToro, Freetrade and Robinhood. Like Football Index, those apps promise ordinary people a way to break into a world previously dominated by big banks and the mega-rich. Those sites, although legal, tempt ordinary people into ploughing massive sums of money into investments that they often have no hope of understanding. Many even model themselves on video games, with users receiving constant pushes to keep investing more.
Despite the obscene amounts of money involved, Ministers are still playing catch-up, and today the world of online investments resembles the wild west, with ordinary people enjoying little to no protection from financial ruin. Without far-reaching reform of the regulations governing those platforms, I fear that the Football Index scandal is doomed to repeat itself. Ministers must act now.
Patricia Gibson (North Ayrshire and Arran) (SNP)
I have a number of constituents in North Ayrshire and Arran who have lost significant sums of money as a result of the collapse of Football Index. Football Index customers were not properly protected, as we have heard today. We know that the Gambling Commission ignored warnings about the business model of the platform, and that the Financial Conduct Authority identified areas for improvement for the company.
The whole shameful episode underlines exactly why we urgently need gambling reform. Gambling must be better regulated. The Gambling Commission, which failed Football Index customers, must be more effective. Customers must have confidence that they will have better protection in future. It is very disappointing that there seems to be no route for redress for those who have suffered significant losses following the collapse of Football Index. In total, about £90 million was lost.
That platform was approved and its licence authorised by the Gambling Commission. The Gambling Commission failed to carry out due diligence, and consumers have paid very heavily for that failure. How is that fair? Why should unsuspecting customers pay for that failure? Clearly, the Gambling Commission’s conduct and competence was not what it needed to be, and its regulation and effectiveness of enforcement was not fit for purpose. One of the many lessons to learn from that is that we must have a gambling ombudsman, to ensure that consumers have a clear avenue for redress.
Those who were caught up in the Football Index scandal and lost a lot of money have been failed at every turn by the very regulation that is supposed to protect them. I urge the Minister to put that right and to not fail them again by turning his back on them. I urge him to compensate the victims and ensure a full review of the Gambling Act 2005, informed by the independent report on the regulation of Football Index. This cannot be allowed to happen again. The whole gambling industry, as well as consumers, will benefit if there is legislation and protection in which everyone can have confidence.
Ms Nusrat Ghani (in the Chair)
Before I call Ben Lake, I want to say that, because everyone’s contributions have been remarkably in time and so powerful, the Opposition Front-Bench spokesperson will have four minutes and the Minister will have eight. I have no doubt that he will take many interventions.
Ben Lake (Ceredigion) (PC)
It is a pleasure to serve under your chairmanship, Ms Ghani. I thank the hon. Member for Blaydon (Liz Twist) for securing this important debate.
The collapse of Football Index has wrought devastation on so many of my constituents, as it has for those of many hon. Members. I have heard stories of people losing deposits for their first homes and savings for marriages. Lives have been ruined. I associate myself with the comments of the hon. Member for North Ayrshire and Arran (Patricia Gibson), in which she completely demolished the regulators by outlining the failure to prevent this crisis.
The Government’s independent report showed that the platform was not properly understood by the Gambling Commission, which did not carry out effective scrutiny of the product or respond quickly to the issues raised. The same could be said of the Financial Conduct Authority. I associate myself with the comments of the hon. Member for Ellesmere Port and Neston (Justin Madders), in saying that we must not allow the false narrative to emerge that these people gambled too much and were irresponsible. Far from it—we heard of insiders warning regulators, trying to blow the whistle on the failings, in 2020.
The UK Advertising Standards Authority also ruled against Football Index on a number of occasions in the years preceding its collapse, including for not making the financial risks of its product clear, and in particular for creating the impression that it was an investment opportunity rather than a betting product. The last ruling was made in September 2019, which prompts the question: why were these warning signs not heeded by the other regulators?
That the ASA ruling led to no meaningful action being taken by either the Gambling Commission or the FCA compounds the litany of failures that led to the current situation—one that could and should have been avoided. Many, possibly all, of us are supportive of compensation for those who have lost out from Football Index.
I am anticipating some of the reasons why the Government might say they will not issue financial redress. Why not use the sizable funds levied by the Financial Conduct Authority and the Gambling Commission from fines and regulatory settlements to pay back Football Index users? For instance, the Gambling Commission issued £58 million-worth of fines between June 2014 and December 2019. More recently, it issued a £9.4 million fine to online operator 888, and the FCA fined GAM International over £9 million just last month. Why cannot those funds be allocated to contribute towards financial redress for those who have lost an estimated £90 million? They certainly deserve it, because it is clear that the regulators with the duty to protect them failed.
Ronnie Cowan (Inverclyde) (SNP)
I congratulate the hon. Member for Blaydon (Liz Twist) on bringing forward this debate. I was assured as recently as this morning in this very room by a Government Minister that the gambling review White Paper is due in the coming weeks. Minister, we cannot keep meeting like this. Among a range of reforms, the gambling review White Paper must effectively regulate the digital age, and consumers must be better protected from Ponzi schemes.
BetIndex Ltd, trading as Football Index, was a sports betting platform. An operating licence was issued to BetIndex by the Gambling Commission in September 2015. It was BetIndex’s decision to dramatically decrease its dividend payment by 82% that led to a virtual market crash on the site. Scandalously, days before the crash, Football Index minted new shares in footballers, enticing consumers to purchase shares that some days later would be worth far less than their former value.
Jim Shannon (Strangford) (DUP)
One employee from the firm stated that 100 people were employed by Football Index. Some, but not all, of those had salaries of £1 million. Does the hon. Gentleman feel that the investigation should pursue the directors, who seem to be well off at this moment?
Ronnie Cowan
Absolutely. I will touch on that briefly later. I watched “Question Time” from Belfast a couple of weeks ago, and I was surprised that the hon. Member for Strangford (Jim Shannon) did not intervene at any point.
BetIndex failed to properly notify the Gambling Commission of the nature of the product in its licence application. The Gambling Commission could have responded better, with earlier scrutiny of the product offered by BetIndex, quicker decision making and action, and better escalation of the issues, but it did not do so. The Gambling Commission ignored warnings that its business model was flawed and that customers’ money could be at risk. Although Football Index was not regulated by the Financial Conduct Authority, the report identified areas for improvement for the FCA. Those included its speed of response to requests from the Gambling Commission.
Football Index is a scandal that underlines the need for wholesale reform of the gambling industry and raises significant questions about the Gambling Commission, given that it saw fit to license the platform and failed to enact adequate oversight. In the regulated sector, when people gamble they should have confidence that they are doing so on the basis of the outcome of a wager. It should not be a gamble on the solvency or sustainability of the licensed operator.
This scandal shows how much a gambling ombudsman is needed to ensure that consumers have a clear avenue for redress in circumstances such as the Football Index scandal. The Government said that they would not use public funds to compensate customers who have lost money, despite customers losing up to, at a modest estimate, £90 million. BetIndex Ltd was approved and operated a licence authorised by the Gambling Commission. The failure is on the regulator as much as it is on the Ponzi scheme that stole consumers’ cash. The Government should be doing more to protect their citizens and should act swiftly when they have let them down. The ex-CEO of Football Index, Adam Cole, has been named persona non grata by the Jersey Gambling Commission, with the regulator citing the executive’s track record as the reason for its decision. While the Jersey Gambling Commission has stepped up, there are no immediate plans for the UK Gambling Commission to act.
At the heart of the scandal are those robbed of their money. One football fan has revealed that he lost £98,000, saying:
“It has completely torn my life apart…It is all the money I’ve ever saved, almost everything I’ve ever had and has put quite simply left me on the verge of committing suicide.”
This is a wrong that needs to be made right through better legislation, stronger enforcement and compensation to those swindled by BetIndex.
Jeff Smith (Manchester, Withington) (Lab)
It is good to see you in the Chair, Ms Ghani. I pass on the apologies of the shadow Minister responsible for gambling, my hon. Friend the Member for Pontypridd (Alex Davies-Jones), for her absence. I congratulate my hon. Friend the Member for Blaydon (Liz Twist) on securing this debate, and thank her for everything she does in fighting for justice for those affected by the collapse of Football Index.
Like me, most MPs will have heard examples of the devastating impact of the Football Index collapse on their constituents. The sheer number of MPs wanting to take part in an hour-long debate is evidence of the seriousness of the issue. Members on both sides of the Chamber have made excellent speeches articulating the pain that many of our constituents have gone through. People have lost tens of thousands of pounds that were supposed to be for their families’ future. Marriages and relationships have fallen apart. The stress and guilt of the experience have induced severe physical health problems; people are even suffering from depression and becoming suicidal. It should never have been allowed to happen.
It is clear that there has been a massive failure of regulation. When the Government commissioned their report on the collapse, there were concerns among those affected that the review did not sufficiently interrogate or challenge the Gambling Commission’s explanation of events, and I would be grateful to hear the Minister’s comments on those concerns. Nevertheless, the report identified clear failings: BetIndex did not properly notify the Gambling Commission of the nature of and changes to the product in its licensing application; the Gambling Commission responded slowly to the challenges raised by the product; and the Financial Conduct Authority could also have done more to help.
Perhaps the most devastating aspect of the scandal is that many of those who ended up losing money believed that what they were doing was safer than what we might call normal gambling. The marketing for the product was couched in the language of investment, not betting, and it was promoted as a safe venture with “guaranteed yields”, which led people into this position. The fact that the product was licensed, appeared in TV and radio adverts and acted as the sponsor on the football shirts of three teams gave it an air of legitimacy that it should not have had. It was a major failing of regulation and demonstrates why we urgently need reform.
Reports suggest that the long-overdue gambling White Paper is finally set to be published this month. I repeat the plea I made to the Minister when we faced each other this morning in this Chamber that this is urgent. Earlier, the Minister said that the White Paper would be published in the coming weeks, which is welcome. Can he confirm that it will be before the summer recess? That would be welcomed by people who have been affected by this scandal and by other problem gambling, because we need the time to assess and debate it.
That kind of wide-ranging and evidence-based reform of our gambling legislation will hopefully prevent anything like this from happening again and impacting on others in future. Of course, the hope of future reform, and the improvements so far from the Gambling Commission, do nothing to help those who have already been impacted. The Government have said that they will not use public funds to provide compensation for the losses caused by the Football Index collapse. They have signposted those affected to seek reimbursement from BetIndex’s liquidation process, but it is becoming clear that the process will not yield enough to those who have been failed.
Many have called for the creation of an ombudsman to get redress for Football Index’s victims. The Opposition think that the Government should look seriously at that useful proposal. There certainly needs to be more action to get redress for victims. The collapse of Football Index has had a shattering impact on many people’s lives. People were badly misled, and our existing regulatory mechanisms failed. It cannot happen again.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Nigel Huddleston)
It is a pleasure to serve under your chairmanship again, Ms Ghani.
I should like to begin by thanking the hon. Member for Blaydon (Liz Twist) for securing this debate, and all those who have contributed to it. She and many others have raised the collapse of Football Index with my Department on a number of occasions. I apologise on behalf of the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Croydon South (Chris Philp), who has ministerial responsibilities for gambling, but he cannot be here, as he is serving on a Bill Committee. As tempting as it is to make all sorts of promises on behalf of another Minister, I had better not do so. I will try to answer as many questions as I can, and where I cannot do so I will ask my hon. Friend the Member for Croydon South to write to hon. Members.
I will not detain Members by going through the full history of Football Index or explaining what the product is. I think that most Members in the Chamber unfortunately are quite familiar with the circumstances, but it is important to give a brief outline of what happened. BetIndex was licensed by the Gambling Commission in September 2015, and it operated a product called Football Index. The commission’s scrutiny of the company increased in May 2019, when an internal compliance assessment flagged a number of concerns. In July 2019, the commission contacted the Financial Conduct Authority to ask for its view on BetIndex’s activities due to some of the features of the product, which have been outlined by hon. Members. The commission subsequently launched a formal licence review in May 2020. It cited a number of concerns about the product, including terms and conditions.
The investigation was in train when, in March 2021, the commission learned that the company planned to suspend its operations and freeze customer funds, which would breach its licence conditions. The commission suspended BetIndex’s licence and the company subsequently entered administration. The reasons behind the collapse of BetIndex are important. The suspension of football matches during lockdown in March to June 2020 played a significant role in the financial difficulties that the company faced. Its business model was based on live football and media coverage of it. For a period of time, that did not exist. In March 2021, BetIndex announced a drastic reduction in the returns that it paid out to customers. It hoped that that would allow the company to recover and customers to continue using the product, but unfortunately that failed.
The Government took the concerns of those affected by the collapse of Football Index very seriously. That is why we acted quickly to appoint Malcolm Sheehan QC in June last year, to lead an independent review into the regulation of the company. We are grateful to Mr Sheehan and his team for their extensive investigation, thorough report and clear recommendations, which we have welcomed. The review highlighted a number of wider factors relevant to the way in which this situation came about, including the actions of BetIndex and the impact of covid, as I have mentioned, but it also identified areas for improvement for both the Gambling Commission and the FCA. Areas for improvement have been highlighted by several hon. Members today.
As my hon. Friend the Member for Croydon South said in his written ministerial statement in September last year, the report identified areas where the commission could have been more effective in responding to the challenges raised by the novel product—Football Index—including earlier scrutiny and the speed of decision making. Although BetIndex was not regulated by the FCA, the report also looked at the FCA’s role in working with the commission, and identified some areas for improvement, including the speed of response to the commission’s requests.
I am pleased that both bodies have acted on the recommendations to ensure that a similar situation does not happen again. That is a key ask from many Members today. Actions have included such things as the Gambling Commission updating the way in which it assesses risk so that novel products are properly considered; and the commission publishing a consultation on changes to its licensing policy, clarifying that it will not normally grant a licence to products that contain language associated with financial products or which require dual regulation.
Sir George Howarth
Does the Minister accept that if people are going to be compensated for the losses that they have sustained, that will require active intervention from the Government? Will he consider the suggestion made by the hon. Member for Ceredigion (Ben Lake) about using fines as a possible way of compensating people?
Nigel Huddleston
I was going to come on to that point. Unfortunately, that ask is not possible, for a couple of reasons. The FCA is required by law to pass revenue from fines to the Treasury, net of enforcement costs, and the Treasury is required to place that into the Consolidated Fund, to be used for Government Departments on important public services. That is the law. The Gambling Commission fines are used for socially responsible purposes, usually for specific projects to reduce gambling harms. I completely understand the intend behind the request, but I am afraid that it is not possible.
Going back to the changes made as a result of the recommendation, the Gambling Commission and the FCA are also signing a strengthened memorandum of understanding to improve co-operation, and the FCA has nominated an executive director to oversee its relationship with the commission. Therefore, some changes have already happened and others are happening now.
Even though the independent report has been published, other processes are ongoing. First, administration proceedings continue, which may result in some money being refunded to customers. Secondly, the Gambling Commission referred BetIndex to the Insolvency Service and asked it to consider whether the actions of BetIndex’s directors prior to administration breached insolvency or fraud laws.
Ronnie Cowan
I have listened to what the Minister has said about compensation. Under section 123 of the Gambling Act 2005, the DCMS Secretary can impose a levy, at the level they determine, for any purpose whatsoever.
Nigel Huddleston
With regard to compensation, as I have said, there are procedures that we cannot move from. It is also very clear that we strongly sympathise—everybody strongly sympathises. As a constituency MP, I also have constituents who have been impacted by the collapse and who have lost money. We have heard today anger and frustration about the genuine hardship—both financial and, of course, mental—caused by the collapse. However, we do not think it would be appropriate for the Government to use public funds to cover losses to individuals resulting from the collapse of a gambling company. Consumers staking money on gambling is not the same as their placing money into other things, such as savings products. Furthermore, the Gambling Commission does not have any statutory powers that would enable it to offer redress for losses suffered as the result of a gambling operator collapsing.
I know that I need to leave time for the hon. Member for Blaydon to respond to the debate, so I will briefly refer to a couple of other points that hon. Members have made. On the Insolvency Service investigation, BetIndex entered into administration on 26 March 2021 and administrators are required to report to the Insolvency Service on company directors’ conduct. Following information received from the administrators and the Gambling Commission, the Insolvency Service has confirmed that it is investigating the conduct of BetIndex’s directors.
The hon. Member for Blaydon asked for a meeting with the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Croydon South. I will pass that request on, rather than make a promise on his behalf, but I am sure that he will receive that request with respect. I will also ask him to respond to a couple of other items that she asked about. Please be in no doubt of the seriousness with which the Government take all the matters that have been highlighted today, and the gambling review will indeed be announced in the coming weeks.
Ms Nusrat Ghani (in the Chair)
Ms Twist, you have about a minute in which to wind up.
Liz Twist
I thank every Member present, from every nation and every party, for being united in one object—seeking redress and making sure that things like this cannot happen again. I also thank all those Football Index “investors”—which is what they thought they were—for their help in this debate. I welcome the Minister’s assurance that he will refer my requests to the relevant Minister, and I look forward to hearing back directly, because there is ground for further discussion.
Question put and agreed to.
Resolved,
That this House has considered the impact of the collapse of Football Index.