The United Kingdom’s Department of Digital Culture, Media and Sport (DCMS) released an independent review last month regarding the collapse of sports betting brand, Football Index, as well as its operating company BetIndex. They found that the company operated as a ponzi scheme.
They also found that the UK Gambling Commission (GC) was slow in regulating its activities. In response, GC’s interim chief executive, Andrew Rhodes recently published a blog article responding to the DCMS review findings.
Rhodes intended his blog post to shed some light into any misunderstandings relating to Football Index’s collapse, as well as GC’s actions in regulating it. He stated that the UK sports betting brand was not a Ponzi scheme, contrary to what the review had stated.
He also added that they found that Football Index’s operating model was similar to other operators at the time of their licensing.
Centre for the Study of Financial Innovation
Furthermore, Rhodes says that prior to the collapse; the betting company was able to cover its liabilities in bet dividends for 12 months at the very least. Because of this, they did not rely on recruiting new customers in order to meet its obligations.
Football Index operator BetIndex did make several mistakes over the course of the COVID-19 pandemic, which would lead to its collapse. However, Rhodes stated that the company did not inform the GC about these actions.
The first mistake was when they increased their dividends to customers by 50%. Unfortunately, this move would not satisfy those customers, so they increased the dividends up further to 100%. This would reduce long-term consumer protection according to Rhodes. The second mistake that they made was that they changed their cash holding requirements, dropping it from 12 months’ worth of dividends to just one.
And with those two moves, BetIndex doubled how fast their cash payment were processed. Due to their business model, they were not bringing in a steady flow of new customers, and as a result they could not keep up with the amount of money going out. This would eventually lead to their collapse.
The blog post also pointed out that the GC cannot check on gambling operators daily. He said if they found out about the company’s wrongdoings earlier, they could have suspended their license much sooner.
BetIndex Investigation Ongoing
In his blog, Rhodes added that BetIndex broke its license terms by offering functionalities not stated in those said terms. The GC Chief would also add that because investigations are still ongoing, they could not discuss individual cases to affected customers.
He would also clarify that the GC could not remedy lost funds due to the company’s collapse, nor do they have any statutory powers to do so.