The Short of It: How the Football Index Emerged a Ponzi
Published April 11, 2021 by Lee R
Just two weeks on, the process of determining how the UK's increasingly spurious Football Index could continue for five years is only beginning.
Index closed its “football stock market” hours short of their license being suspended by the UK Gambling Commission, plunging a seemingly easy win for sharp punters into an abyss of suspended assets in a matter of weeks.
Illegal Business Model
That's because the dividends the company was paying were actually bets which the house couldn't cover.
The Share Illusion
In its five years plus of operation (since October 2015), the “football stock market” did not in practice sell shares: just bets that the best footballers in England would excel on the pitch over the next three years—with all the money for the so-called shares of the respective players paid up front to amount to in practice three years worth of performance bets.
The Actual Regulation
On the stock market, bets on projected performance are called derivatives, and regulated accordingly by the Financial Conduct Authority.
The Downfall
Users were lulled into a sense of security on the Football Index platform by buying shares of the best players, and making money off their supposed knowledge of the game.
The Shortfall
But the game was rigged because there was no money to pay them—only new user funds. Punters “cashed out” by selling their shares to other users, meaning new user subscription funds were being used to cover the “winning” bets.
The Bursting of the Bubble
With usership reaching some 500,000 account holders according to Football Index, estimates of the amount of money held in the Football Index exchange ranged from £60m to £90m at the time when the index “collapsed” and was liquidated two weeks ago.
Popularisation of the Brand
Football Index's “football stock market” became a household name in the UK after a marketing campaign that included advertisements displayed on taxis and tube trains which continued up until two years ago.
Outlook: the Conundrum
Despite a requirement imposed in 2019 by the Advertising Standards Authority to add the disclaimer that the site “should not be taken as financial advice;” and a public admonishment from the Gambling Commission in January 2020 that the company was “an exceptionally dangerous pyramid scheme under the guise of a football stock market,” Football Index rolled on, selling unsecured bets as stable investment products with no FCA oversight nor intervention of any kind from any financial or gambling authority—until collapsing under its own weight two weeks ago.
