It felt inevitable and now it is officially going to happen: an independent investigation will be launched into the sudden collapse of soccer betting site Football Index. According to a Sunday report in The Times, UK Members of Parliament (MP) were the catalysts for the inquiry, one of whom said, “something appears to have gone very wrong here.”
Football Index is currently in administration, effectively the UK equivalent of bankruptcy, and has had its gambling licensed revoked by the UK Gambling Commission (UKGC).
Football Index was a popular betting site, specific to European soccer. It operated differently than traditional betting sites, though. It used a stock trading-type system in which users could buy shares of players, hoping that those shares increased over time. Shares could either be purchased from other users on the marketplace or from Football Index directly when new shares were issued.
The key to the whole thing, though, was the dividend each share could earn. Depending on a soccer pro’s performance on the pitch – or even the number of mentions they got in the media – Football Index would distribute as much as 14p per day per share of that player. Hence, users could enjoy a steady income stream regardless of the fluctuations in share price if their players did well.
Despite the site’s popularity, Football Index was losing tons of money because of those dividends. As such, it announced on March 5 that the new maximum dividend would be just 3p, going into effect in 28 days.
As a result, share prices plummeted across the board, since they had only a fraction of the value they once did. People attempted to panic sell, but nobody was buying. While cash balances were intact, most people had their Football Index funds tied up in shares, some into the five- and six-figures, and that was before the price crash.
It is estimated that users lost around £100 million after Football Index announced the reduction in dividends.
Infuriating customers even more was the fact that Football Index continued to issue and sell new shares between the time the company decided to slash the dividend and the time it announced it. Thus, they knew share prices would tank, all while making money in stock sales.
The investigation will likely affect the ongoing review of the UK’s Gambling Act 2005. The person who was quoted earlier told The Times said the probe “will feed into” the Gambling Act review and that “If we need to make changes to regulation to protect people, we will.”
The UKGC hasn’t gotten out of this unscathed, either. The All-Party Parliamentary Group for Gambling Related Harm said that the Commission failed to “enact adequate oversight.” In addition, The Guardian reported in March that the UKGC had been warned about the viability of Football Index back in January 2020. The author of the report allegedly provided to the UKGC called the site a “pyramid scheme” which was at high risk of collapse if it did not continue to increase its customer base.