UK Prime Minister urged to probe gambling regulator's role in Football Index's collapse

UK Primer Minister Boris Johnson was urged for “an urgent, independent public inquiry” into the collapse last month of online betting platform Football Index by more than 40 MPs and political stakeholders. 

In a letter to Johnson, they say the inquiry should “include the role of the Gambling Commission and the Department for Digital, Culture, Media and Sport (DCMS) in its terms of reference,” The Guardian reports.

Coordinated by the all-party parliamentary group for gambling-related harm, the letter pulls no punches in its description of the issues that led to the collapse of Football Index and a similar platform, Footstock, in the space of a few days last month. It is also highly critical of the Gambling Commission’s failure to heed a warning in January 2020 about deep flaws in Football Index’s business model.

Football Index allowed its users to buy what it described as “shares” in leading football players, and paid “dividends” on each share according to a player’s performance. However, despite the appearance of being an “investment” product, it was a gambling platform, licensed and regulated by the Gambling Commission. “Football Index were essentially operating a ‘fraction reserve banking’ system,” the letter says, “where only a portion of users’ money and overall ‘Market Cap’ was available to withdraw at any one time.

“Such a platform should arguably have been subject to liquidity controls and capital ratios, which regulation by the Gambling Commission did not require. As a result, Football Index was fatally and financially reliant on user growth to not only avoid insolvency but to avoid its own customers losing what has been estimated as being £90m of their own money.”

The letter adds there is evidence that suggests “the Gambling Commission licensed what became a pyramid scheme, was subsequently warned that it had become a pyramid scheme, but by negligence or design allowed Football Index to overstate its financial position, reassuring its users to attract more investment and new money into the platform”.

The letter concludes by warning the “scandal has brought into sharp focus regulation that is not fit for purpose and mechanisms for consumer redress that are nonexistent”, adding: “The Gambling Commission should not be allowed to mark their own homework. Allowing them to do so will mean affected individuals, their families, and the reputation of British gambling, will be left to pay the price for this failure.”

The letter is signed by the Labour MP Carolyn Harris, a longstanding campaigner on gambling issues and the chair of the all-party parliamentary group for gambling-related harm, and Lord Foster of Bath, the chair of Peers for Gambling Reform. Other MPs who are signatories include Sir Ed Davey, the leader of the Liberal Democrats; the former Conservative leader Sir Iain Duncan Smith, a vice-chair of the APPG for gambling-related harm; and Ronnie Cowan of the Scottish National Party, also a vice-chair of the APPG. The letter has been signed by 19 MPs and 22 peers.

DCMS is reported to be planning an independent inquiry into the collapse of Football Index and the role played by the Gambling Commission, which could be announced as early as next week. Officials in the department are keen to stress the concern among ministers over the company’s failure, and that the DCMS investigation will have the advantage of being launched and completed more swiftly than a full public inquiry.

The platform saw a crash in the value of “shares” in early March after Football Index's management announced a cut in “dividends” of about 80%, and it suspended trading a few days later, a few hours before the Gambling Commission announced the suspension of its licence.