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Requiem for Illusion: Sacking the UK's Football Stock Exchange Index
As an investment vehicle, the football stock exchange was no better than any Ponzi, just more fun--at first.
At Football Index, the game is up: and the sob stories are flooding in.
Tales of Woe
The support groups are open: weddings are being canceled, masses of thousands pound credit card bills will go unpaid; endless stories are circulating regarding the 500,000 odd account holders who have seen their funds vanish into the funnest, easiest way to make a a few pounds off their favorite pastime.
Except a few pounds blossomed into a few thousand pounds, or a few hundred thousand pounds, which begs the question: how could something this easy continue, or have been allowed to continue?
Or we could even ask: what stock share in history ever performed as predictably and profitably as a star player's pitch on the field?
The Sports Investment Industry
There is an industry where people are empowered to bet on the long-term performance of their favorite sports stars: it's called the memorabilia industry. And it's not a novel concept.
The Football Index Gimmick
With its catchy-sounding “football stock market,” Football Index managed to slip through the radar of the UK Gambling Commission; the UK Financial Conduct Authority FCA, and all the players who happily bought three year's worth of shares of their favorite star players up front.
Since October 2015, the guaranteed “dividends” of between 1p to 14p per share owned on player performance over a three-year period attracted increasing numbers of punters confused for, or as, “investors,” depending which of the many sides of the illusion one was buying into.
No Check, No Balance
Years of wins and increasing Football Index usership went by and large unnoticed or unopposed, with only a site disclaimer published in 2019 from the Advertising authority that the site should not be viewed as an investment vehicle (an admonishment which is commonly associated with the Financial Conduct Authority, as applicable to financial services and investment products which the FCA governs).
The Fundamental Flaw
Which begs the question: what exactly is an investment, as opposed to a bet?
That seemingly intriguing distinction boils down to a fundamental and wholly transparent characteristic which it would do all players and investors good to determine for themselves in the future: the ability of the company offering the investment to pay for the shares themselves.
No Actual Coverage
The Football Index had no such ability: it was paying off the bets (“cashouts”) of the users with the money of the new users, a.k.a. the new punters.
Pure Gamble, No Investment
If the Football Index was in possession of the funds to cover the total value of all the share prices of its users at any given moment, THEN the operation would have at least resembled an actual investment. But when an organisation pays off the wagers of their users with the money of other users, and has limited funds of their own, and certainly not enough to cover in-house every wager that they lose; that is called a gambling operation.
To summarize this sad tale of woe, and to punctuate this oft-repeated error: if it seems too good to be true, just check if you are playing with house money. Because if not, there is no net to catch you below.