Football Index Collapse: Lessons Learned
Debate between Stephanie Peacock and Alex Sobel(7 months, 4 weeks ago)
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Stephanie Peacock (Barnsley East) (Lab)
It is a pleasure to serve under your chairship, Mrs Murray. I will begin by paying tribute to my hon. Friend the Member for Blaydon (Liz Twist) for securing this important debate and for all her work on this important issue.
The collapse of Football Index three years ago was devastating for many people up and down the country, as we have heard. Football fans had been told that they could put their money and confidence in players who they identified as rising stars, and were promised that they would be paid dividends if they were correct. It was advertised as the world’s first football stock market, which was misleading to users as they believed they would be using the football knowledge they had gathered over years to make money on the scheme, rather than participating in gambling.
After administrators were called in, the collapse took an estimated £90 million in customer funds. Victims have formed the Football Index action group and I pay tribute to its work. It is campaigning to ensure that the events that led to the loss of that huge amount of money never happen again, which my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) spoke about so well. Some users lost hundreds of thousands of pounds, as the hon. Member for Strangford (Jim Shannon) highlighted.
Following the collapse, the Gambling Commission decided to suspend Football Index owner BetIndex’s operating licence in 2021. The Government then commissioned a review by Malcolm Sheehan KC of the events surrounding the establishment and subsequent collapse of Football Index, with the intention of learning lessons from the mistakes made. His report concluded that BetIndex failed to properly inform the Gambling Commission of the nature of the product in its licence application and did not inform the regulator of changes to the product after its launch as it was required to.
The Football Index action group includes that among its criticisms of the model, arguing that everything about the index sought to brand it as an investment product rather than a betting site, as my hon. Friend the Member for Sheffield, Brightside and Hillsborough (Gill Furniss) outlined. Indeed, one of the index’s two main features, the “go-to-market” feature, was not communicated to the Gambling Commission as part of the original application, flouting the commission’s expectation of openness and transparency during the process.
The Government report also found that there was potential to improve the Gambling Commission’s handling of the incident. In the first instance, reports that the Gambling Commission was made aware of the issues with Football Index in 2019, two years before the collapse of the product, are extremely worrying. Questions remain about why the commission failed to act sooner, thereby potentially mitigating some of the effects of the collapse. The report recommended a number of steps for the commission to take, including greater scrutiny of new gambling-related products intending to come to market, consideration of the effect of language used on consumer understanding of gambling products, and more prompt decision making and action. The report also suggested that the Financial Conduct Authority could have done much more to help, and recommended improvement of regulatory co-operation between the commission and the FCA.
It is welcome that the Government have committed to implementing the recommendation of the Sheehan review in full, as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) said. People feel that they have been let down by both Football Index and the regulator, and argue that they should never have been put in this position without intervention to prevent cash losses. They remain angry and the Government must learn from the incident to ensure that others do not find their capital at risk in the same way.
In an age when advances in technology have allowed the betting and gaming industry to develop rapidly, it is right that we work with the industry to ensure that consumers are protected from potentially harmful schemes while allowing those who gamble responsibly to continue to do so.
Alex Sobel (Leeds North West) (Lab/Co-op)
My hon. Friend is presenting an excellent summary of the failures of Football Index. Like others, I have constituents who lost large sums of money. I am concerned to hear that a new platform called KiX—a football cryptocurrency trading platform modelled on Football Index—has been set up with the involvement of Adam Cole, one of the founders of Football Index. Should the Government not ensure that the FCA and the Gambling Commission both look into KiX at this early stage and that the appropriate regulatory activity happens this time so we do not see a repeat of Football Index?