In January 2020, the UK Gambling Commission (UKGC) issued a notice about betting exchange Football Index, labelling the website as a “dangerous pyramid scheme.”
According to The Guardian, a paper submitted to the UKGC highlighted questions about Football Index’s dividends, which it said mirrored pyramid scheme practises.
According to the study, Football Index’s liabilities would “exceed £1 million a month” in January 2020, and the only way the company will stay in business in the long run “is through the constant sale of yet more new shares to new users alongside a constant churn in positions.”
The author concluded the study by stating that if usage development slowed or slowed down, the corporation would soon find itself unable to cover these obligations to customers.
Many consumers and buyers left the Football Index website last week after a proposal to cut dividends on footballer stock from 14p to 3p, resulting in many traders losing thousands – in some cases hundreds of thousands – of pounds.
Criticism of business model
Last year’s study reportedly forewarned of this prospect, noting that “life-altering sums of money are at stake and at risk,” as well as criticising Football Index’s business model for luring consumers into a “dangerous false sense of security.”
The exchange’s users were motivated to “shift capital from genuine investment vehicles (bank savings, ISAs stocks) into it, given the expectation and hope and promise of constant high returns,” according to the claim.
The Advertising Standards Agency (ASA) has previously reprimanded Football Index owner BetIndex for marketing itself as an investing forum rather than a betting operator.
This was also stated in the study, which reported that this marketing tactic “led to unparalleled levels of irresponsible gambling behaviour from 10,000s of users misled into believing they are investing rather than gambling, with little or no consideration that all of their money is at risk.”
Football Index went into administration and halted all company activities last week as a result of the mass evacuation of traders and customers, though BetIndex remains optimistic that the brand will be “recused as a going concern.”
The UKGC then revoked the operator’s gaming licence, as well as its participation of the Betting and Gaming Council’s standards body (BGC)
The Guardian’s disclosures come at a time when the UKGC is under criticism for its handling of the demise of Football Index. Earlier this week, John Whittingdale, the DCMS secretary in charge of the reform of the UK’s gambling rules, allegedly had “frank talks” with the regulator.