UKGC Publishes Update on BetIndex
The UK’s Gambling Commission has issued a new statement on BetIndex, the sports betting platform which went into administration in March. Its collapse has left former customers angry and out of pocket. The regulator, which is now investigating the case, came under fire for its handling of BetIndex’s license.
Football Index went into administration last March, despite warnings over its business model. ©Omar Ramadan/Pexels
Platform Collapse
The UKGC has published an update on how it is progressing in handling the case of BetIndex. BetIndex is the parent company of Football Index, a sports betting platform that was popular in its heyday, but fell into financial difficulties. The government is carrying out an independent review into its regulation, led by Malcolm Sheehan QC.
Football Index marketed itself as the stock market of football, offering platform users shares in football players. The value of those shares rose and fell depending on player performances. At its peak the platform was home to around 500,000 customer accounts. However, its demise came when the platform cut player dividends from 33p to 6p.
To make matters worse, customers were encouraged to invest beforehand, as new shares had just been released. The values of customer portfolios were slashed, and users withdrew their funds in anger. As the site relied on continual investment to pay out shares, it was soon forced to go into administration.
The Gambling Commission subsequently revoked its operating license, and the Betting and Gaming Council cancelled its membership. Begbies Traynor are acting as the insolvency practitioners in the company’s administration process, and began customer hearings in May.
Despite being compared to a stock market, the company was licensed as a gambling product and regulated by the Gambling Commission. This meant that despite investing heavily in the site, customers’ funds were not protected by the Financial Conduct Authority.
BetIndex is liable to pay customers an estimated £3.2 million. The company will also distribute a further £1.3 million. However, it is thought that customers may have lost closer to £90 million in total. The remuneration process has been fraught with complications, as the administrators must decide when to pause bets that are still active.
Complex Administration
The Gambling Commission’s update aims to keep former customers affected by the platform’s collapse up to date with proceedings. It says that despite its regulatory powers, some assumptions have been made about what it can do. Nevertheless, the regulator recognizes the distress that Football Index customers are experiencing.
The regulator came under fire for not acting sooner to protect consumers, as it was revealed that it was tipped off about problems at the sports betting operator long before it crashed. Critics argue that had the regulator acted then, the collapse could have been averted and customers would not have lost so much money.
The Betting and Gaming Council raised concerns over the fact that the regulator was warned about the betting platform’s business model at the start of 2020. The BGC says that it was not made aware of this at the time, and that its main priority is the welfare of customers.
The Gambling Commission is undertaking its own internal investigation into how matters unfolded. While that is being carried out, it is the regulator’s priority that BetIndex treats its customers fairly and continues to communicate with them on any new developments as they happen. The company is still in administration, and the Commission is in close contact with it over proceedings.
Affected customers can find access to support and announcements on the company’s website. The Commission goes on to state that it is ultimately up to the administrators Begbies Traynor and the courts to resolve the return of funds to former customers. Those funds will be returned from the Football Index Player Protection Trust Account, which is valued at £4.5 million.
Regulator Under Review
The Gambling Commission is not responsible for the return of funds, but it is in contact with the administrators to ensure that it covers its legal obligations. According to the update, the “Trust Deed monies” are currently being held by the Viscount of Jersey. These are funds that were set aside by the operator to cover customer stakes in the event of financial problems.
A Jersey court gathered on June 22nd to convene on an order from the High Court of England and Wales to repay customer funds. Customers will be notified via email when the funds are released. They will then be able to log into their account on Football Index and make a withdrawal request.
The regulator has received queries about the share portfolio aspect of Football Index’s product. So far, the administrators have not placed a value on share portfolios. When it does, that decision will be independent of the Gambling Commission.
Moving on from the administration processes, the update also comments on the government’s independent review into how the Gambling Commission handled BetIndex’s operating license. The regulator has welcomed the review, which it hopes will have a positive impact on how complex products are regulated in the future.
As the Football Index platform operated differently to other more conventional sports betting sites, regulating it was difficult. While its offerings had all the characteristics of gambling products, they were closer in structure to financial products. Despite its problems the platform was popular, so it is not unlikely that another operator could produce a similar product.
The government published the Terms of Reference for its independent review on June 7th. The regulator says that is cooperating with the review fully, and looks forward to finding solutions that can be added to the Gambling Act Review. That review will bring the 2005 Gambling Act up to date with the digital age.
