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The UK Government is to launch an independent review into the meltdown of a Jersey-based ‘football stock market’ that left users facing losses totalling £100m – and Jersey’s Chief Minister has said he’s also open to launching an inquiry.
Announced yesterday, the UK Government said its review of Football Index’s sudden collapse in March would include the UK Gambling Commission, as well as “other relevant regulators."
Some users of the betting platform - owned by BetIndex, which is registered in Jersey and regulated by the Jersey Gambling Commission - are now facing losses in the thousands.
While both the Jersey’s and the UK’s gambling watchdogs are separately investigating whether there were any regulatory breaches, thousands have questioned whether regulators themselves had their eye off the ball and should have their actions reviewed.
Pictured: Some football fans - including some in Jersey - are facing losses of thousands of pounds each.
A cross-party group of more than 40 MPs and peers, including longstanding gambling campaigner Labour MP Carolyn Harris MP, and LibDem leader Sir Ed Davey, wrote to Prime Mnister Boris Johnson last week, demanding that the UK gambling watchdog be included in a review of Football Index’s sudden and catastrophic failure.
Their letter suggested that 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.”
Explaining the problems with the betting platform’s structure, it explains: “Football Index were essentially operating a ‘fraction reserve banking’ system where only a portion of users’ money and overall ‘Market Cap’ was available to withdraw at any one time,” it read.
“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.”
CLICK TO READ: The All-Party Parliamentary Group on Gambling-Related Harm's letter to Boris Johnson.
The UK’s Minister for Gambling and Lotteries John Whittingdale responded to their calls yesterday, confirming that an independent expert would be appointed to run a review of the events between September 2015 and 11 March 2021, with findings made public in the summer. A White Paper setting out any potential proposals for reform of the UK’s gambling laws will be published by the end of the year.
It’s also possible the Jersey Gambling Commission will fall under the scope of the review, with the UK Government also confirming that it would “also look at the work of other relevant regulators, to provide a clear account of how Football Index’s activities were regulated and identify if there are areas for improvement in how complex products are treated.”
Confirmation of the UK review came just hours after Deputy Steve Ahier asked in the States Assembly yesterday: “Does the Chief Minister accept that there was a regulatory failure in this case? And will he hold an inquiry into how they received a betting licence, having been described in a report in January 2020 as being an exceptionally dangerous pyramid scheme?”
Pictured: Deputy Steve Ahier (left) asked the Chief Minister (right) if he was open to launching an inquiry, which he said he was, "if the facts warranted it".
Chief Minister Senator John Le Fondré responded: “I think before I commit to something like that publicly, I’d be very happy to meet with the Deputy and talk it through…I’m not averse if the facts warranted it, to some form of review to understand exactly what went wrong.”
Asked whether he felt the island had suffered reputational damage as a “centre for regulated gambling”, Senator Le Fondré replied: “There are always going to be challenges but the crucial thing is how we deal with them and making sure that the regulation is appropriate and works. I think at this stage it’s probably too early to comment much further, but I think the short answer is that Jersey as a whole still remains a well-regulated jurisdiction.”
Two local users, Victor* and Fred*, who stand to lose nearly £20,000 between them, told Express that they were concerned as to whether Jersey’s gambling laws, regulatory framework and support systems for ‘problem gamblers’ are fit for the digital age.
Pictured: Fred called for action from local politicians and Jersey’s Gambling Commission to ensure such a crisis cannot occur again on the latest Bailiwick Podcast.
Commenting on the UK review, Mr Whittingdale said: “We know how difficult it has been for people affected by the collapse of Football Index with some losing significant sums of money. We are setting up an independent inquiry so that we can find out how this happened.
“We are determined to ensure that regulators have the right tools to protect customers and to deal with novel products. The gambling landscape is evolving rapidly and so we are also taking action by reviewing the Gambling Act to make sure our laws are fit for the digital age.”
*Name changed to protect anonymity.
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