Football Index Collapse

Nusrat Ghani Excerpts

Tuesday 7th June 2022 Westminster Hall

[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.

[Ms Nusrat Ghani (in the Chair)]

Beautifully done, Mr Bell.

--- Later in debate ---

[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.

--- Later in debate ---

[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.