Football Index: widening the (regulatory) net

Football Index’s high-profile collapse could prove to be another lesson in how novel online products can fall through regulatory gaps. Many football fans will be familiar with the platform styled as the “football stock market”. Customers could earn real money by buying and selling “shares” in football players, and receive dividends based on player performance. The platform collapsed in March, following changes to the rules of play, amid speculation that Football Index was reliant on new deposits to fund pay-outs to existing customers. The UK government has now announced the detail of its review into how the platform was regulated.

Football Index was licensed by the Gambling Commission. Yet its marketing as a stock index led some to assume it was FCA-regulated. Many customers treated their deposits into the platform as investments and have since lost significant sums of money.

Parallels can be drawn with the London Capital & Finance scandal. LCF was authorised by the FCA to undertake certain activities but its core activity, the sale of minibonds, was unregulated. Similarly, cryptocurrencies are increasingly popular amongst consumers. Yet the FCA only oversees whether cryptoasset exchange providers and custodian wallet providers comply with their anti-money laundering obligations – their broader activities fall outside of the FCA’s remit. 

Is there a need to plug these gaps or to raise consumer awareness of the current limits of regulatory oversight? Arguably yes but, ultimately, regulators do not decide their own remit. Legislative change is required if we are to enable regulators to proactively keep step with ever-evolving sectors. Regulators, including the FCA, recognise the need to look beyond their own regulatory perimeter. In the meantime, closer cooperation between regulators, like the FCA and the Gambling Commission, could be an important interim measure.

In the longer-term, policy makers are conducting several reviews which offer the potential to tackle these issues. The government’s review of Football Index is expected to report this summer, with the Gambling Act review white paper due later this year. The draft Online Safety Bill, published in May this year, offers yet another opportunity to widen the regulatory net to provide oversight of activities which currently fall between regulatory regimes. In the meantime, companies and consumers should remain vigilant to avoid being caught offside.