The football trading industry was in disarray as soccer player-trading platform Football Index’s market crashed considerably. Its users have collectively lost £90 million. The company held itself as a combination of fantasy sports and the stock market.
Football Index users could buy shares in soccer players. They were then offered dividends based on player performances and real-world values. It’s also reported that the company had over 500,000 registered users, out of which 30,000 were regular traders. This means that there’s an average individual loss of at least £3,000 each.
Football Index’s Market Crash
The company was launched in 2015 and became a popular brand for English football. It heavily advertised itself on TV, radio and player’s jerseys. Moreover, because it mimicked a stock market, the value of shares would fluctuate depending on metrics such as the player’s on-pitch performances.
However, the market crashed after Football Index announced a dramatic cut to dividends. They would be slashing dividends by 80%. Their reason for it is to “ensure the long-term sustainability of the platform.” Many users then found that their shares have plummeted. Currently, they are unable to withdraw their funds, and their accounts have been frozen.
The Measures Taken By the Regulator
Bet Index, Football Index’s parent company, had its license suspended by the UK Gambling Commission. After its suspension, many people are wondering why Football Index even got the license in the first place and why the UKGC was not able to intervene.
Some have also stated that the company was akin to a Ponzi scheme. Others suggested that it cut dividends deliberately to devalue the platform’s market and reduce its liabilities. But, no matter the reason, most people agreed that the UKGC could not handle the matter well.
Additionally, after the company’s suspension, EFL Championship teams Nottingham Forest and Queens Park Rangers announced that they would end their sponsorship deals. Football Index previously sponsored their jerseys.
The UKGC’s Shortcomings
The market crash happened just when the government is conducting a regulatory review on gambling laws. The review promises to reshape the UK’s gambling landscape. Thus, UKGC is in the spotlight because many people believe them to be negligent in their responsibilities.
On its part, the UKGC stated, “People using gambling operators do so at their own risk. Although remote operators licensed by the Commission must keep customer funds in a separate account/s, there is no guarantee that this will ensure customers get all their money back if the company runs into financial difficulties.
“When the Gambling Commission licenses an operator, we look at suitability, including their financial circumstances. But we do not oversee their businesses on a day-to-day basis or monitor the financial health of operators directly in real-time. That would impose significant regulatory costs and could give a false sense of security to customers.”
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