Gambling Commission comes under fire in report on Football Index collapse

The Gambling Commission has vowed to make changes to the way it regulates new digital gambling products after a government report criticised its efficiency and highlighted oversights before the collapse of Football Index.

The report was released two days after the Parliamentary All Party Betting & Gaming Group (APBGG) revealed it had launched an inquiry into the Gambling Commission’s competence and effectiveness after receiving numerous criticisms from sections of the betting industry.

Football Index, which allowed customers to buy ‘shares’ in footballers and receive dividends based on how the players performed, informed the Gambling Commission of its intention to enter administration on March 11. The regulator suspended the licence of BetIndex, operator of Football Index, that evening.

Football Index licence suspended as clients face big losses following crash

The High Court made an administration order on March 26, with estimates that Football Index's customers lost up to £90 million as a result of the collapse. The value of open bets on the website – based on the price paid by the customer – was £124.26m on March 17.

The report found the Gambling Commission could have scrutinised the product earlier, taken quicker action and more efficiently escalated issues, while BetIndex was found to have not properly notified the Gambling Commission of the nature of the product in its licence application or made the regulator aware of changes after its launch.

Gambling Commission: the report found the regulator could have acted more swiftly

Gambling Commission chief executive Andrew Rhodes said: “No amount of explanation of what happened to Football Index will take away the justifiable hurt and anger its customers are experiencing having lost, in some cases, life-changing amounts of money when the gambling company collapsed.

“We accept and agree we should have drawn a line under our efforts sooner, but this does not mean those customers would not have lost money in the event of the BetIndex company collapsing. Throughout this case we sought the best outcome for consumers within the scope of our regulatory powers.

“The review provides a number of helpful recommendations for how both regulators can work better together and for how our regulatory approach deals with novel products.

“We have already acted on a number of the recommendations in the report, such as more explicitly including novel products as one of the factors we consider as part of our assessment of a gambling company’s risk. We have also further strengthened the memorandum of understanding we have with the FCA [Financial Conduct Authority] so that issues that blur the lines between financial services and gambling are escalated and actioned more rapidly."

Responding to the report, Paula Lee, a partner working on the investigation on behalf of around 10,000 Football Index users, said: “We welcome a ‘lessons learned’ approach but the government cannot use this to absolve itself from responsibility for the harm suffered. Compensation for those who lost money through the collapse of Football Index must be an absolute priority.”

The report also outlined areas of improvement for the FCA, including in speed of response to requests from the Gambling Commission and consistency of messaging on regulatory responsibilities, with the findings being shared into the government’s ongoing review of the Gambling Act.

New gambling minister Chris Philp said: “I’m extremely conscious of how devastating the collapse of Football Index has been on its many customers, which is why we moved quickly to launch this independent review.

“We have been clear we must learn lessons to make sure a situation like this does not happen again. I’m encouraged to see the Gambling Commission and the FCA are taking concrete steps on an action plan on how they will better work together."

BetIndex has been referred to the Insolvency Service by the Gambling Commission, asking whether it considers the actions of the firm's directors prior to administration breached fraud or insolvency laws.

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