Legislation
UK – Gambling Commission explains reasons for not suspending BetIndex licence earlier
By Phil - 23 March 2021
Due to the number of consumers interested in its investigation into BetIndex, the British Gambling Commission has taken the decision to publish some further information about the background to its regulatory action.
BetIndex, owners of Football Index, moved into administration, and immediately had its operating licence suspended by the UK Gambling Commission. Football Index, which describes itself as ‘the football stock market,’ said that ‘after a difficult and challenging week’ the decision had been made ‘to suspend the platform.’
The Commission said: “Following concerns about the operator we began a formal Review into the licensee under section 116 of the Gambling Act on 20 May 2020. The focus of our review was to address issues in relation to the betting aspect of the product At that stage there were no grounds to suspend their operating license.
“During the course of the review, we utilised expertise from across the Gambling Commission and a specialist external QC to examine the business model, the finances of the company and the complex legal questions over the appropriate regulatory framework.
“In the early part of March, BetIndex advised of plans to self-suspend with a view to restructure and relaunch. Our concerns as to the timings of this and the position regarding customer funds led us to suspend the licence on March 11 2021. We have acted in tandem with the Jersey Regulator, with whom BetIndex also hold a licence.
It added: “We know from experience that the suspension of a license can, of itself, trigger or hasten the financial decline of an operator and put customer funds at risk. That is why we will always consider whether there are steps short of suspension that can still deliver the right regulatory outcomes and address the risks that consumers face without accelerating the financial collapse of a business. We will therefore only turn to suspension when that is the only option for delivering the right regulatory outcome and, indeed, the legislation requires us to exercise those powers in that way. We were satisfied that on March 11 suspension was the only regulatory option left available to us.”
The most recent BetIndex product allows customers (called traders) to place bets (shares) on the future performance of footballers. A bet lasts for three years during which time they accrue dividends. After three years the bet expires meaning that customers lose their stake and any right to further dividends. The product evolved to enable customers to buy and sell bets with prices fluctuating according to demand.
The Commission added: “We have identified that the product contains elements that are betting in nature, and therefore regulated by us as gambling, as well as elements are not considered gambling and therefore not subject to our regulatory remit.
“Whilst our investigation is ongoing our priority is to ensure the licensee focuses on treating consumers fairly and keeping them fully informed of any developments which impact them.”
BetIndex holds a Trust Account intended to hold dividends to be paid to winning customers.
The Commission said: “We have been assured by their solicitors that BetIndex has suspended payments from this account whilst customers’ entitlements can be calculated and pending an application to the Court for directions. BetIndex requires a direction from the Court as to the appropriate treatment of those funds. We understand that those legal processes are underway.”
“The assurance the Commission has is that the funds in the Trust Account will not be distributed to any creditor other than customers. However, its ability to distribute immediately to customers, and if so which customers, is likely to be subject to the directions of the Court rather than the Commission.”
