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UK Ministers are planning an independent inquiry into the sudden meltdown of a Jersey-based ‘football stock market’, which left users facing losses totalling up to £100m, it has been reported.
Football Index suddenly ceased trading in March following notices from Jersey's, and the UK’s, gambling watchdogs.
Some users of the platform - which is owned by BetIndex, registered in Jersey with an office in Wharf Street - are now facing losses in the thousands, and are questioning whether regulators had their eye off the ball.
Jersey and the UK’s gambling authorities are now investigating what happened, but the Times reported yesterday that the UK Government is now planning its own probe.
The national newspaper reported that Ministers were understood to be “deeply concerned” about Football Index’s collapse.
“Something appears to have gone very wrong here,” a source was quoted as saying, adding: “This case further reinforces the need for our comprehensive review of gambling laws. This independent investigation into Football Index will feed into that work and if we need to make changes to regulation to protect people, we will.”
Pictured: Some football fans are facing losses of thousands of pounds each.
While it was a betting platform, Football Index operated like a stock market and allowed players to buy imaginary shares in their favourite players and receive a pay-out – described as a ‘dividend’ – if they played well in real-life matches.
It operated on the concept of a longer term bet, meaning that users didn’t win or lose money immediately.
Many argue that this led them to believe that Football Index was a “healthier” and “safer” alternative to normal gambling.
Among them was Fred*, one of the roughly 100 users in Jersey, who poured thousands into the platform and stands to lose a ‘portfolio’ worth £12,000.
In the latest Bailiwick Podcast, he explained that he was concerned that regulators appeared to have failed to detect a number of warning signs.
These included the company’s CEO, Adam Cole, saying during a previous interview that he didn’t believe regulators understood his product, and Football Index doubling dividends last year before dramatically slashing them by 80% last month.
“How could that be possible?... If the Gambling Commission does not understand a company’s structure that they’re regulating, how can you trust the Gambling Commission’s investigation? So we will see what happens. I’m not pointing fingers at all. I’m just very curious as to how this could happen and I’m very interested to see the outcome,” Fred said.
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.
He added: “It’s easy for people to come out and say, ‘Hang on, you put thousands of pounds into a gambling platform, you should know that isn’t safe gambling and you should only bet what you can afford and thousands of pounds shouldn’t be going in there.’
“But, in my view, it wasn’t us that gambled recklessly. Our bets changed overnight - how can that happen? It was more of a company gambling irresponsibly with our money rather than us gambling irresponsibly and I think that’s the key takeaway from this.”
In the House of Lords last month, Labour peer Lord Sikka asked whether regulators had carried out “capital adequacy” and “stress tests” on Football Index.
“The government is monitoring the situation with Football Index closely and Ministers [the Secretary of State and Minister for Media and Data] have met the Gambling Commission twice to receive urgent reports. A live investigation by the Commission is ongoing. The Commission has been in close contact with the Jersey Gambling Commission throughout this case and continues to work closely with them,” Baroness Barran, Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport, responded.
“The Gambling Commission does not carry out capital adequacy and stress tests, which would normally apply to banks, or routinely monitor the financial viability of operators. It looks at suitability when licensing an operator, including their financial circumstances, and may review these aspects in the course of its compliance activity. The Commission will investigate where there is evidence that operators have breached licence conditions.”
Pictured: Questions have been asked in the House of Lords about regulators' oversight of Football Index.
While his money was disposable income, Fred said he was worried about the mental health impact on some users who may have ‘invested’ greater sums in Football Index.
Football Index's administration process is still going through the English courts. The company has previously stated that its aim is to rescue the platform and relaunch in a restructured form.
Fred wants action from local politicians and Jersey’s Gambling Commission to ensure such a crisis cannot occur again.
Assistant Minister for Economic Development, Deputy Kirsten Morel, said last month that the Government considered the demise of Football Index a matter for the gambling authority.
Express has asked whether the Government is now considering launching its own review in light of recent developments.
*Name changed to protect anonymity.
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