Football Index (FI) was an innovative product when it was launched in 2015 and for a long time was hailed as the next big thing in betting. The product combined elements of fantasy football with traditional betting in a format akin to a stock exchange and proved a real hit with fans. Growth came at a good pace and, helped by some private funding and more than £1m raised through crowdfunding, Football Index were able to market their platform quite aggressively.
Major shirt sponsorship deals with Bristol Rovers, Nottingham Forest and QPR really got the brand out into the consciousness of football fans. What’s more, it gave Football Index a real air of legitimacy and trustworthiness. Around 2018 and 2019, more than £1m was traded on a busy day at the football equivalent of the stock exchange and sections of the media continued to praise the site. In September 2020, it was ranked second in the Sunday Time’s annual Tech Track 100.
It earned that spot thanks to sales growth of more than 300% in the three years prior and by reporting their latest sales figures of £45,120,000. Things were looking good and FI was being touted as the future of football and sports betting. All of which makes the speed of the company’s decline even more dramatic and surprising.
Football Index Loses License & Parent Company Enters Administration
Just a few months on from being heralded by the Sunday Times as one of the nation’s fastest-growing private technology companies, the wheels well and truly came off. There had been some issues throughout 2020’s global health crisis due to the lack of football but, for a long time, the model of the business seemed untroubled.
Concerns were raised in January 2021, if not earlier, as the price of key players dropped dramatically. In September, one of Football Index’s poster-child players, Jadon Sancho, hit a peak price in excess of £15 per share. He was the “game’s” most valuable player and given some FI customers had bought shares at less than £1, many were sitting on considerable paper profits. However, by October, his price had collapsed to just £10.31, dropping to £4.20 just before Christmas. FI customers who had bought at £10 and even higher were now facing potentially huge losses and that was even assuming they could find anyone willing to buy the shares.
Major Flaws Pointed Out
At this time, Caan Berry, a professional sports trader, author, blogger and YouTuber, raised serious concerns about Football Index. He believed there were potentially four major flaws with the site/business model:
- The removal of “Instant Sell” meant customers could no longer be sure of getting their stakes back.
- The fact that FI could alter the dividend structure at any time they wanted.
- The fact that FI could issue more shares in a player at any time.
- The fact that the scheme was being sold as involving “shares” when in fact it was gambling through the use of buying and selling time-restricted contracts.
Much of what Berry feared came to pass, with in-play dividends being cut not long after he issued his warning. Things got even worse as in February the site began issuing new shares in a number of the most popular players. According to reports, they created around 15,000 new shares in eight of the top players. The Guardian noted that “Football Index could be expected to have raised up to £75,000 from sales of new shares in just eight players: Sancho, Neymar, Kylian Mbappé, Trent Alexander-Arnold, Paul Pogba, Bruno Fernandes, Mason Greenwood and Marcus Rashford.”
New Dividend Structure
Given they are believed to have created around 300,000 new shares in February, it is clear that they generated considerable extra funds. Mike Bohan, Football Index’s Chief Executive said he would hold an open discussion with users at the end of February to try and improve how the site functioned. This did not happen and, instead, alarmingly for those with lots of money tied up in players, on Friday 5th March, it was announced that a new dividend structure would see payouts slashed from a maximum of 14p to just 2p.
Dividends were a key part of Football Index and how punters, who rightly or wrongly perceived themselves as traders, made cash from the site. Such a huge cut to dividends was devastating and prices collapsed yet further. Jadon Sancho, whose price had already plummeted dramatically as discussed, went from £7.52 before the announcement down to just 72p by the Sunday. A similar picture was seen with many other players, with the price of all players dropping substantially.
By the following Thursday, 11th March, it was being widely reported that administration was looming. A statement on the Football Index website read:
We are pursuing a restructuring arrangement to be agreed with our stakeholders including, most importantly, our community. We are preparing this through an administration with insolvency practitioners Begbies Traynor, to seek the best outcome for customers with the goal of continuing the platform in a restructured form.
The huge crash in prices meant that many customers had been looking at massive losses but now it increasingly seemed likely that almost all FI customers would lose everything. On the 11th, The Guardian reported that if Football Index collapsed it would “be the biggest failure of any British betting company, possibly leaving individual customers facing potential losses of £200,000 or more.”
What the UKGC Had to Say
The following day, the UK Gambling Commission (UKGC) suspended the license of FI’s parent company, the Jersey-based BetIndex Ltd. The UKGC stated that this was down to:
. . . an ongoing section 116 review into the operator, as we had concerns activities may have been carried out in purported reliance on the licence, but not in accordance with a condition of the licence, and that Football Index may not be suitable to carry on with licensed activities. We have made it clear to the operator that as the investigation progresses, we expect it to focus on treating consumers fairly and keeping them fully informed of any developments which impact them.
At that stage, it was unclear just how much the losses from FI’s collapse would amount to, with estimates ranging from around £50m to well over double that. Championship duo, Nottingham Forest and Queens Park Rangers, immediately announced that they would no longer be using Football Index’s name or logo and, as things currently stand, the situation continues to unfold.
UKGC Reveal Long-Term Concerns
At the time of writing, we do not know exactly how this will all play out but on the 19th March, the UKGC revealed that they had been looking into BetIndex Ltd since May 2020. There were concerns over the finances, framework and regulation of the company. However, the Commission claimed that moving to suspend the gambling license earlier than they did would not have helped.
They stated, “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”. Having tried to give FI all the time and help they could, they added, “We were satisfied that on 11 March suspension was the only regulatory option left available to us.”
Huge Losses Sustained
Whilst it seems likely that Football Index will fail and many people will lose considerable sums of cash, the reasons for the huge losses are more complex than the simple failure of a betting company. Over the years, many businesses in a range of sectors have gone into administration, including a good number of bookmakers and betting sites. What makes Football Index different is that many of its customers misunderstood exactly what they were getting into.
Misunderstanding & the False Idea of “Easy Money”
Football Index was, when all is said and done, a gambling site – hence its license and regulation came from the UKGC. It was not a financial trading product and nor was it an investment vehicle. However many punters were taken in by the way it was marketed and the hype that was created on social media. Numerous football and betting forums were awash with stories of people making “easy money” on Football Index.
It was suggested by many fans of the site that making money was incredibly easy for anyone with just a modicum of football knowledge and a basic understanding of the concept. There were generous welcome offers put forward by FI too that encouraged people to give them a go. Some promos gave you a supposedly risk-free chance to try Football Index out for yourself, the company happy to refund any losses you made up to, for example, £500, within a given period.
Rapid Growth Amplified by Social Media
Naturally enough many people did make a good deal of cash from Football Index. Word of mouth, amplified by social media and aided by these generous promotions, meant that more and more people were attracted to the site and it experienced rapid growth in the first few years of business.
Some were cautious and questioned how the site could be sustainable if it was seemingly so easy to make money. Where was the money coming from? Football Index was paying generous dividends on players but, of course, these dividends bore no comparison with those paid by listed companies which are derived from company profits. The players that the dividends were attached to did not generate any money for Football Index and some critics did suggest, from very early on, that the site had far more in common with a Ponzi scheme than with a stock exchange.
Major Players Involved Gave Credibility to the Scheme
Whilst some were sceptical and wondered where their dividends were coming from, others were blinded by the huge increases in value their FI portfolios were showing. Players, such as Neymar, Jadon Sancho, Lionel Messi and Bruno Fernandes, also delivered steady and regular dividend payments and these alone saw some players make a good income. Whilst some more cautious customers invested modest amounts into the site, others, truly believing that they couldn’t lose, piled everything they had into it.
There are stories of people quitting their jobs to “trade” full time, people taking out loans, using inheritance and encouraging friends and family to do likewise. These people did not ask how a site could exist where everyone makes money. They did not wonder what might happen if things went wrong. They did not realise that they were gambling and some of them were vociferous in their criticism of anyone who raised such doubts.
What Was the Football Index Model?
To make matters worse, the Football Index model meant that large sums of cash were needed in order to make a decent-sized profit or income. Traditional betting allows punters to stake small amounts which are tied up for a short period (usually). The bet either wins or loses and within a day or so (though some bets are long term, whilst others may settle within minutes or even seconds), you typically either lose the value of your stake or you win the stake multiplied by the odds.
At the 2021 Cheltenham Festival, there were several big wins, one punter famously cashing out for £250,000 from a £5 bet. However, at Football Index, the model meant that wins, in the form of dividends, were only a few pence per share. They were paid regularly and the top dividend was as high as 14p per share but even so, that would mean you would need 100 shares to receive a payment of just £14.
Hypothetical Player Example
As you might expect, in general, it was the most expensive players who earned the highest dividends. If we imagine a hypothetical player priced at £10 per share, that would mean the FI customer would need to have £1,000 invested in them to receive the £14 dividend. A traditional investor (in stocks and shares) would be delighted with weekly or even daily dividends of 1.4%. However, for someone approaching Football Index from a sports betting background, having £1,000 or more tied up with a site for a long period would have seemed unusual.
Football Sponsorships Made Punters Feel Safe
None the less, Football Index was a respected and polished site and many people simply trusted them. They sponsored several medium-sized English football clubs and were widely praised in the mainstream media. It is easy to see why punters felt safe and many invested more and more into the site. What’s more, most customers never countenanced the idea that they might lose their entire “investment”, with a slight drop in a player’s value probably the worst-case scenario envisaged by many.
Dividends were often used to buy more shares with a little taken out of the pot as spending money. All the while, in the background, the overall value of portfolios was going up, on paper at least, and customers were establishing portfolios worth five and even six-figure sums. This money may have been tied up, held by Football Index, but punters believed they would always be able to get most, if not all of it back. It was, in their eyes, nothing like simply sticking £50,000 on a horse to win, or a player to score a goal.
How Did Football Index Make Money?
In theory, Football Index would make money by charging a commission of 2% on any player sales or purchases. In addition, they would generate income through the sizeable spread on most players, the spread being the difference between a player’s buy price and their sell price. To expand on this, in simple terms, you would have to pay more to buy a player than you would earn if you then tried to immediately sell the same player, FI pocketing the difference, as well as their 2% commission.
We do not currently know, and may never fully know, just how realistic Football Index’s model and dividend structure was based on the levels of trading they saw. As said, at their peak, Football Index was reportedly trading in excess of £1m of players per day and this would have generated a considerable commission for the company. However, they spent large amounts of money and marketing and are thought to have paid out more than £4m in dividends during the 2018-19 season alone.
An Unsustainable Business Model
Could the business ever have been a success? Were the dividends that made the site so appealing to fans sustainable or was the idea always to attract people with high dividends that could only be maintained, as in a Ponzi or pyramid scheme, by the funds generated and added by new customers? This latter view was certainly that of a report sent to the UKGC in January 2020, which warned of considerable dangers.
In simple terms, the report suggested that there was no way the site could sustain its ever-increasing dividend commitments. Complied by an industry insider, the document was emailed to senior staff at the UKGC and also presented to them in person. It argued that “should user growth stop or decline, the company would quickly find itself unable to pay these liabilities to users”. A damning indictment.
As said, we will probably never know for sure whether FI was a profitable company with a valid future and this remains a story that is developing. Exactly what will happen to Football Index remains to be seen. If it really was an idea that could work, will another bookmaker or betting site step in and take over? Can anything be salvaged? What will happen next?
Will Football Index Customers Get Their Money Back?
As said, this is a story with a lot more left to happen and at this stage, we do not know exactly how things will play out. The biggest question for the thousands of customers who had money tied up with Football Index is will they get their money back. Sadly, at this moment it time, we just do not know.
There are politicians getting involved, with MP Richard Holden discussing the FI collapse on the BBC. He was one of several MPs who contacted Oliver Dowden, the Culture Secretary, asking for an inquiry into the downfall of Football Index.
There is talk of legal action against the parent company of Football Index and even, possibly, against the UKGC. In terms of the current status of the business, on the 19th march the Gambling Commission issued an update with regards parent company BetIndex. They said, “BetIndex holds a Trust Account intended to hold dividends to be paid to winning customers.” They also stated that: “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.”
History tells us that no matter what the positive spin companies and administrators try to put on these cases, the little guys usually lose out. The punter or customer is often low down the pecking order when it comes to the distribution of whatever funds remain and, of course, at this stage, we do not know what, if anything, is in the FI coffers.
Given the doubts many experts have over the model itself, it seems unlikely that any major UK bookmaker would be prepared to step in and take on Football Index’s customers and liabilities. That has sometimes happened in the past but only with like-for-like businesses. As such, at the time of writing, it has to be said that things look rather bleak for anyone unfortunate enough to have got caught up in this.