Football Index Collapse: Lessons Learned

Barbara Keeley Excerpts

Wednesday 24th April 2024 Westminster Hall

[Barbara Keeley (Worsley and Eccles South) (Lab)]

It is a pleasure to speak in the debate with you in the Chair, Mrs Murray. I congratulate my hon. Friend the Member for Blaydon (Liz Twist) on leading the debate and on her excellent work on this issue. I have two constituents who were affected by the collapse of Football Index in 2021. One told me he had lost £20,000 as a result. He said:

“I am a father and soon-to-be husband whose family has been swindled by the stress, guilt and shame which this has brought me in such an important part of mine and my family’s life. This has put me in some very dark places and I have had thoughts and stress like I’ve never experienced before.”

Failings by a number of organisations led to this impact on customers, which was highlighted in the Government’s independent report into the regulation of Football Index, led by Malcolm Sheehan KC. First, the report found that BetIndex Ltd, which traded as Football Index, did not properly notify the Gambling Commission of the nature of its product in its licence application, and nor did it inform the commission of changes to its product as it should have done.

Secondly, the report found that the Gambling Commission could have responded better, including through better scrutiny of the product offered by BetIndex in 2015, better monitoring of the development of the product, and quicker decision making once it identified in 2019 that BetIndex appeared to be operating outside the scope of its licence. Indeed, as my hon. Friend the Member for Blaydon said earlier, if the platform had been taken down in 2019, that would have saved money being lost by a number of the victims. Thirdly, the report identified areas of improvement for the Financial Conduct Authority, including its speed of response to requests from the Gambling Commission and the consistency of messaging on its regulatory responsibilities.

It is welcome that the Government have committed to implementing the review’s recommendations and that, in September 2021, the Gambling Commission and the Financial Conduct Authority agreed an amended memorandum of understanding, including on response timetables and the process for escalation of unresolved issues. However, I understand that people such as my constituents, and so many others, still feel very upset and angry at the loss of capital as a result of the collapse of Football Index.

Some believe that there were further failings by the regulatory bodies that were not identified in that independent review. In particular, people feel misled about the nature of the product they were using. One constituent told me about

“the magnitude of the deception that took place by the Football Index, which positioned and promoted itself as a safe investment with ‘guaranteed yields’.”

They also said:

“This attracted a significant number of users who were wholly misled as to the nature of the Football Index product and the degree of safeguards pertaining to its regulation.”

There is a need to improve financial literacy to help counteract financial products that are purposely misleading and confusing, and aimed at exploiting customers for greater profit. Unless lessons are learned from the collapse of Football Index, there exists a risk that a similar situation could emerge through new platforms.

Like my hon. Friend the Member for Blaydon and others present, I am particularly concerned by reports about the new trading platform KiX, which is using Football Index as a proof of concept. The Times has reported that KiX is being advised by the co-founder and chief executive of Football Index, Adam Cole. As we have heard, users of KiX will be able to trade footballers using non-fungible tokens, but because KiX is a decentralised, autonomous organisation underpinned by the blockchain technology used by cryptocurrencies, it is not currently regulated. Its website says that KiX is beginning with football but may expand into other sports if successful. Campaigner David Hammel has called the development of KiX

“a real kick in the teeth”

for all those affected by the collapse of Football Index. I would be interested to hear from the Minister whether the Government have had discussions with regulators about how to protect people from the risks of this latest scheme.

Returning to the issues caused by the collapse of Football Index, it is important that the Government fulfil their intention in the gambling White Paper to protect vulnerable people from gambling harms and financial detriment. This situation should never have been allowed to occur and it must never be repeated, and I look forward to the Minister reassuring us on behalf of our constituents that it will not be.

--- Later in debate ---

[Stuart Andrew]

I was going to come on to that point. I reassure colleagues that the commission will continue to take a very active role in the monitoring of this product, and the FCA is also looking into the KiX business and will take appropriate risk-based action if it identifies that any of its activities fall into the FCA’s remit. However, I will raise this issue with both organisations again to ensure that everything is being done, because, like everybody else here, I do not want this to happen again. I hope I can reassure the House that the commission has been monitoring the market for several years for potential products that attempt to replicate Football Index. It has intervened in several instances. Although it would not be appropriate for me to name those businesses, that demonstrates the commission’s proactive work in this area.

The hon. Member for Blaydon raised the issue of StocksFC. The Gambling Commission is engaged with StocksFC and is monitoring the company at this moment. I will write to the commission for further information on that product and ensure that everything is being done to monitor it.

[Barbara Keeley]

I want to emphasise the point that my hon. Friend the Member for Blaydon made, but I also want to pose a question: what credibility does the Minister think the Gambling Commission has now, given that so many people have lost so much money? As for the commission posing the question of KiX, “Is it gambling?”, if it is based on the Football Index proof of concept and the expertise going into it is from Football Index, it is Football Index mark 2 in a different form. Hon. Members have all outlined how much this was not an investment and how much it was gambling. In fact, questions of compensation are affected by that, in that Ministers have said that taxpayers’ money should not be used to compensate people for gambling losses. So it seems to me that it is a bit of a joke to ask, “Is it gambling?” Do we have to ask that when it so obviously is?

[Stuart Andrew]

I understand the hon. Lady’s point, but it is important that these things are looked at properly, under the remit of the existing legislation. The Gambling Commission has done a lot of work in this space to try to deal with the grey area that the hon. Member for Inverclyde (Ronnie Cowan) mentioned. I want to come on to that point, because the cryptoasset side of things brings in another area of work.

I assure Members here that I will speak to my Treasury colleagues to highlight this issue, and to ensure that we do not find ourselves in a position like this again and address each of these issues. I am confident that the relationship between the Gambling Commission and the FCA is much improved and that the regular meetings between the two organisations will ensure that there is not a slip again. However, in order to get this right, I am more than happy to speak to colleagues in other Departments to ensure that no cracks still exist.