Football Index Collapse: Lessons Learned

Debate between Liz Twist and Gregory Campbell

Wednesday 24th April 2024 Westminster Hall

[Liz Twist (Blaydon) (Lab)]

I beg to move,

That this House has considered the lessons learned from the collapse of Football Index.

It is a pleasure to serve with you as Chair, Mrs Murray. This debate is about the lessons to be learned from the collapse of Football Index. I had a debate on Football Index in June 2022, but I am here again because I was alarmed to read reports in The Times and The Guardian just a few weeks ago about a new platform, KiX, which uses Football Index as a proof of concept and involves some of the people previously involved in Football Index. I do not want my constituents to be caught up in a scheme that replicates the problems of Football Index, so we need to learn the lessons.

The collapse of the supposed betting platform Football Index was mired in controversy, as the site proved to be incorrectly regulated for the majority of its lifetime. Those regulatory failures affected tens of thousands of people across the UK, many of whom lost substantial amounts of money. I am sure most Members in Westminster Hall today and across the House have received emails from constituents who lost life savings, struggled with their mental health and dealt with putting their lives back together after that failure.

Let me give a quick recap. The Sheehan report, which the Government commissioned, was damning in its verdict that there were regulatory failures from both the Gambling Commission and the Financial Conduct Authority in their work to protect customers from Football Index. According to the report, the failures go back to the beginnings of the platform. The Gambling Commission was made aware of the “go to market” function back in April 2015, but did not note that feature during the licensing process. It did not consider other aspects of the platform’s similarity to a stock market at the licensing stage, and the platform’s terms and conditions were not subjected to detailed scrutiny prior to 2019. The report states that at that point the Gambling Commission became aware of the full nature of the product, but it did not suspend the platform’s licence for another two years. That is crucial, because if the platform been taken down in 2019, it could have saved some customers huge amounts of money. The report also noted that, during that time, the Financial Conduct Authority expressed inconsistent views about whether the platform fell under its remit, and was driven by resource prioritisation, rather than by its legal responsibility to protect consumers.

Those failures cost victims dearly. Many lost their homes, their life savings or their wedding funds, causing them huge amounts of stress, anxiety and depression, not to mention financial difficulties for some. My constituent Collin spent months unable to work as a result of the stress. 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.”

Many victims are reluctant to come forward due to the shame that they feel after being misled in such a way. That has not been helped by the language of the Government, who referred to support for “problem gamblers” in their response to the dormant assets consultation last year. To be clear, no one should have to feel shame if they are struggling with gambling addition, but that framing negates the fact that the product’s promoters branded it as an investment product.

None of the victims walked into a bookie’s and put £3,000 on an accumulator or a race. They were misled and instead believed themselves to be investors. They were misled and instead believed themselves to be investors taking risks, hedging funds and building a portfolio—something that would be normal for those who engage in the stock market. To suggest otherwise is to let the platform and the regulators off the hook.

There are unanswered questions. Since my debate in June 2022, there have been three different Prime Ministers, four Secretaries of State for Digital, Culture, Media and Sport, and four Ministers responsible for gambling, but as of yet, no one has been able to make much progress on this vital issue. In that time, I have heard countless more stories of the hardships suffered by victims as a direct result of these regulatory failings. Together, their financial losses amounted to as much as £124 million. They are desperately waiting for action and dealing with uncertainty. They fear that they may never see justice, and that they may never be compensated.

I pay tribute to the journalists who have been fighting to keep this issue in the public domain. Joey D’Urso at The Times, Ellie Pitt at ITV and Greg Wood at The Guardian have all helped to tell the story of the victims and have given them a voice. I encourage the Minister and those present to attend the all-party parliamentary group hearing on 30 April, so that they too can hear at first hand from those affected.

It is important that we keep the focus on this because so many questions remain. Although the Sheehan report was fundamental to exposing some of the regulatory failures, the text itself references the significant time constraints under which it was produced and the fact that it therefore could not take in the full amount of evidence that has since come to light. Some of the victims have lost everything, and they deserve to have their voices heard.

Having secured a meeting with the Minister back in 2022, the Football Index group has continued to gather and develop evidence that strengthens its case. However, I have met the group, and the Government have not accepted a submission from it. I am grateful to the current Minister for meeting representatives of the group, but after three long years, they deserve more—they deserve action.

There are ongoing concerns related to what the regulators knew and when, and whether there were additional opportunities to prevent the eventual outcome that were missed. It is my understanding that the current Minister was sufficiently concerned by what he heard to consider an independent review of the evidence by someone external to the Department and the Gambling Commission. No doubt the Minister will tell us himself exactly what he has been doing, but the action group are still waiting for progress on this issue. If we are to learn lessons from the collapse of Football Index, there must be proper, independent scrutiny of all the available evidence. I hope that the Minister will commit to that during this debate.

Turning to novel products, a process of examining what went wrong with Football Index is vital, so that we can protect people from such harm in the future. Unfortunately, recent developments have made this matter all the more urgent. As I said at the start of this debate, in a recent article in The Times it was revealed that the co-founder of the Football Index platform is working with others to create a new trading platform, citing Football Index as proof of concept. This is deeply worrying. I can only imagine the frustration and anger that victims must feel upon hearing this news; they will be concerned that others might be let down in the way that they were.

The new platform, KiX, will be a football cryptocurrency trading project that makes use of non-fungible tokens and cryptocurrency. Ministers have previously said that the Gambling Commission has strengthened its approach to novel products, and I understand that the commission is currently reviewing elements of the KiX product. However, the commission has also said that the product may lie outside the scope of regulation, given the involvement of NFTs and crypto.

On 23 April, the Government set out plans to overhaul gambling and admitted that Football Index blurred the boundaries between gambling and investing. If Football Index blurred the lines, KiX is seemingly crossing over them altogether to create a similar product in an unregulated market. Having seen the impact on Football Index victims, how could we possibly permit another product that preys on football fans by persuading them to part with hard-earned income and invest in their knowledge of football?

[Mr Gregory Campbell (East Londonderry) (DUP)]

I thank the hon. Member for giving way and congratulate her on securing the debate. She talked about susceptible fans sometimes being preyed on when it comes to gambling. Does she agree that one of the big emerging problems in the past few years has been the virtual epidemic of gambling companies sponsoring almost every single Premier League team, to the extent that young people think of and see their heroes as being part of the gambling industry, which is compounding the problems that she is rightly analysing today?

[Liz Twist]

I thank the hon. Member for his intervention. Of course, we could have a whole different debate on the influence of the gambling industry on football—indeed, I am sure that in future months we will have such a debate. But today that link between gambling and clubs and their players, with or without their consent, is being used to attract people to gamble money.

As I was saying, I fear that the product that I am talking about today—KiX—is dangerous and has the potential to bring misery to more people. I therefore urge the Minister to do everything he can to ensure that this platform does not launch without the utmost regulations being in place. To put it simply, that is the very least that the victims of Football Index deserve and we do not want to see more victims being created through new platforms.

I also bring to the Minister’s attention another company—StocksFC. I am told that it has been operating in the crypto space for about a year. Alarmingly, a quick glance at its website and at the Twitter account of its head of marketing shows the dangers of this type of platform. It is clearly masquerading as a stock market and is manipulative in its language, suggesting to people that they are “investing” and sharing the totals of profits made on their supposed investment.

I will add that despite this platform allegedly being a crypto-based platform, there are no entries about it on the blockchain and users in the UK can deposit money straight into its system from their debit cards. I am sure that the Minister will agree that that is deeply concerning and a danger to consumers. Does he know whether the Gambling Commission is aware of this operator and if so, what discussions has he had with the commission to ensure that consumers are being sufficiently protected?

Many victims of the original Football Index collapse are vulnerable and eager to recoup their losses through any means, and I fear that new platforms could prey on their vulnerability. I hope that the Minister will raise these concerns with the Financial Conduct Authority, and that the FCA and the Gambling Commission will work in partnership to ensure that nobody is left victim to an unregulated football stock exchange ever again, consulting with the Football Index action group to learn from the real-life examples that it can provide.

The evidence regarding the regulatory failures that led to the collapse of Football Index is highly compelling. It serves as a reminder that we cannot let anything like that collapse happen again. Meanwhile, victims have long-standing grievances that are yet to be resolved.

People from across the country will now be willing the Government to respond to the new platform of KiX in a serious manner and to review, in full, the evidence that the Football Index action group has sourced and put together. I hope that the Minister will listen to calls from the victims, because that is quite simply the least that they deserve.

Finally, I would welcome any update that the Minister can provide on this subject. At the heart of this scandal is injustice. We need to develop a plan that seeks to compensate victims of the Football Index collapse effectively while working to ensure that any future football platforms, such as KiX, cannot be launched without learning considerably from the lessons of the Football Index scandal.