Andrew Rhodes, the interim Chief Executive of the UK Gambling Commission (UKGC), has published a video response to the independent review of the collapse of Football Index.
As noted last week, the Commission has established new practices in how it evaluates the risks of novel products recommended by the review and to strengthen its working relationship with the Financial Conduct Authority (FCA).
The UKGC acknowledged that it faces many questions, to which Rhodes wanted to provide the commission’s perspective on the review’s conclusions.
“The Independent Report concluded that the Commission did take a lot of steps in relation to Football Index, to try and bring the product into regulatory compliance, and to try and protect its customers,” he said.
However, Rhodes agreed with the judgement that the “Commission ultimately took too long in reaching a final decision” to proceed with regulatory action against Bet Index – the managing company of Football Index.
Responding to questions as to why the UKGC licensed Football Index, Rhodes replied that Football Index had ultimately changed the product that the company was originally licensed for.
Rhodes added: “The product that we licensed was one where customers could place a bet on the future of a football player and be paid a dividend, based on the performance of the player. Those dividends might reach the value of the original bet, but they may not.
“We did not licence the product for the sale of bets, known as shares between users. Once it became clear that Football Index was not operating according to its original licence, the Gambling Commission faced difficult choices in its regulatory approach.”
Rhodes outlined the complexities of taking regulatory enforcement against Football Index, as the company would have collapsed instantly on the Commission’s order to suspend its licence – placing player balances, funds and open bets at risk of being terminated.
Though Football Index had changed its product, the UKGC’s compliance teams observed that the company had maintained its LCCP duties in protecting account balances and paying dividends until the ‘last minute’.
Rhodes continued: “Although Football Index got into serious financial difficulties, it did meet its liabilities and ensure that cash balances were protected. Though we recognise that isn’t where most customers had their funds.”
On player compensation and the recovery of losses, Rhodes stated that the Commission held no mandatory responsibility to cover original stakes.
“I’m afraid the answer is no. Gambling products do not have the same protections as financial services products do,” he said. “Many industries offer a mandatory or voluntary compensation scheme that provides some protection to customers in the event of a company collapse.
“Gambling is not regulated that way, it’s regulated as a leisure activity, it is one of the reasons we recommend that no one bets with more that they can afford.”