More than 40 MPs and peers from all political backgrounds have signed a letter to Boris Johnson calling for an urgent and independent public inquiry into last month’s collapse of Football Index, the self-proclaimed football stock market.
The letter to the prime minister also says the investigation should include the role of the Gambling Commission and the Department of Digital, Culture, Media and Sports. (DCMS) in its mandate.
The letter, coordinated by the All-Party Parliamentary Group on Gambling Injury, does not punch in its description of the issues that led to the collapse of Football Index and a similar platform, Footstock, in the within a few days last month. . He is also very critical of the fact that the Gaming Commission ignored a warning in January 2020 about serious flaws in Football Indexs’ business model.
Football Index allowed its users to buy what it described as stocks of great football players and paid dividends on each stock based on player performance. However, despite the appearance of an investment product, it was a gaming platform, licensed and regulated by the Gambling Commission.
According to the letter, Football Index essentially operated a fraction reserve banking system, where only a portion of users’ money and overall market cap was available for withdrawal at any time.
Such a platform arguably should have been subject to liquidity controls and capital ratios, which the regulation of the Gambling Commission did not require. As a result, Football Index was fatally and financially dependent on user growth not only to avoid insolvency, but also to prevent its own customers from losing what was estimated to be $ 90 million of their own money.
The letter adds that there is evidence to suggest that the Gaming Commission authorized what became a pyramid scheme, was subsequently warned that it had become a pyramid scheme, but by negligence or design allowed Football Index to overestimate its financial position, reassuring its users to attract more investment. and new money on the platform.
The letter ends by warning that the scandal has developed regulations inappropriate for its purpose and non-existent consumer redress mechanisms, adding: The Gambling Commission should not be allowed to mark its own duties. Allowing them to do so will mean that those affected, their families and the reputation of UK gambling will have to pay the price for this failure.
The letter is signed by Labor MP Carolyn Harris, longtime activist on gambling issues and chair of the all-party parliamentary group for gambling damage, and Lord Foster of Bath, chair of Peers for Gambling Reform.
Other signatories include Sir Ed Davey, leader of the Liberal Democrats; former Conservative Leader Sir Iain Duncan Smith, APPG Vice President for Gambling Injury; and Ronnie Cowan of the Scottish National Party, also vice-chairman of the APPG. The letter was signed by 19 MPs and 22 peers.
Announcements from government departments have been curtailed during the mourning period following Prince Philip’s death last week, but the DCMS is reportedly planning an independent investigation into the Football Index collapse and the role played by the Gambling Commission , which could be announced. from next week.
Ministry officials are keen to stress ministers’ concern over the company’s failure and that the DCMS investigation will have the advantage of being launched and completed more quickly than a full public inquiry.
The Guardian first reported growing concerns about the Football Index’s future in January 2021, when several crashes in its market left customers with millions of pounds trapped on the platform.
A final catastrophic collapse in stock values followed in early March after site management announced a dividend cut of around 80%, and suspended trading days later, hours before gambling. Commission does not announce the suspension of its license. .
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