Football Index Collapse: Lessons Learned

Debate between Ronnie Cowan and Stuart Andrew

Wednesday 24th April 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mrs Murray. I thank the hon. Member for Blaydon (Liz Twist) for tabling this debate. I know she also secured a debate in 2022 on the impacts of the Football Index collapse. I would like to acknowledge the contribution she has made to ensuring that these events receive the attention that they deserve. She is an admirable representative of those in her constituency and others who have been affected. The Government appreciate, and I certainly do, the impact these events have had on them and many others. I personally offer my sympathies to all of those affected financially by the collapse of Football Index.

I thank all hon. Members for their contributions today. I also want to say thank you to David Hammel for his campaigning work on behalf of people who have lost money as a result of these events. I have met Mr Hammel and know that he has engaged administrators, regulators and politicians on behalf of those affected.

Today’s debate has been valuable and I commend all those who have contributed for their thoughtful comments. It has been important for me personally to hear the perspective shared this afternoon on this important topic. I want to be clear that I and the Government recognise the serious consequences that the collapse of Football Index has had on consumers. As I said, I sympathise with all those affected. It is important that we ensure that a similar scenario cannot happen again.

I will not repeat the background to these events, as that has been well covered by colleagues. I want to focus on the action being taken following the independent review of the regulation of Football Index, led by Malcolm Sheehan KC. I thank him for that work. His report examined the regulatory circumstances around the granting of a licence to BetIndex, its subsequent suspension and the company’s ultimate financial failure. Importantly, it identified areas, as others have said, where the Gambling Commission could have been more effective in responding to the challenges posed by this novel product. It also highlighted where the FCA could have co-operated more effectively with the commission.

The report recommended that the Gambling Commission should enhance its scrutiny of novel products; such products are less likely to fit neatly into existing regulatory frameworks, and there is greater risk that they are poorly understood by customers, as colleagues have mentioned. It recommended closer examination of the language typically associated with investments and financial markets, which can obscure the fact that a product is a gambling rather than a financial product. It outlined the need for more prompt decision making, quicker internal escalation and greater scrutiny of any differences between described and actual features of products. Finally, the report recommended that the commission consider whether operators should be required to demonstrate additional levels of liquidity in the case of longer-term tradeable bets like those offered by Football Index.

Although Football Index was never regulated by the Financial Conduct Authority, Mr Sheehan’s report recommended that the FCA should also seek to achieve quicker and more consistent decision making on regulatory responsibility issues. The report concluded that the FCA could have been faster to come to decisions in the Football Index case and to communicate those to the Gambling Commission.

The Gambling Commission and the FCA agreed a formal memorandum of understanding in June 2021. The Sheehan report described that as an appropriate and proactive step. However, it also made recommendations about how the memorandum could be strengthened. It recommended that the new memorandum should include an agreed mechanism for resolving disputes over regulatory responsibility; mechanisms for ensuring that disputes are identified, discussed and escalated where necessary; and provisions for the written recording of meeting outcomes.

It is vital, as the title of the debate points out, that we learn lessons from the Football Index case to ensure that a similar situation does not take place again. I am pleased that all the recommendations of the report for the commission and the FCA have been implemented in full.

The Gambling Commission has taken various actions to achieve that. It consulted on and updated its statement of principles for licensing and regulation in June 2022. It has updated how it assesses risk so that novel products are properly considered. It now undertakes systematic reviews of novel products offered by existing licensees. It has also increased the resources available to ensure that licensees disclose notifiable changes to products. The commission has also changed its approach to licensing products where long-term bets might appear more like financial products. It has made it clear in its statement of principles that it will not normally grant a licence to products that use language usually associated with investments or financial products.

Various colleagues raised issues around advertising, and the hon. Member for Worsley and Eccles South (Barbara Keeley) asked about the gambling White Paper. We are not introducing one single Bill because we want to ensure that we get as many of the changes done as quickly as possible. We are making good progress. I have consistently committed to trying to get everything done by the summer. Some of these things will be ready for statutory instruments soon, but some are what the Gambling Commission will implement. By splitting it up, rather than having one big Bill that might take a long time to get through this place, we are proceeding at pace to bring about the reforms.

The FCA has also implemented all the recommendations from the report. Importantly, it has taken steps to improve the speed and consistency of its decision making, including nominating an executive director to oversee the relationship with the Gambling Commission.

An updated memorandum of understanding addressing all the review’s recommendations was agreed between the commission and the FCA in November 2022. The agreement has established a process and timeline for co-operation between the two authorities and a process for escalation, and created a relationship owner and primary contact in each authority to oversee the operation of the memorandum. It also requires a quarterly minuted meeting between the two authorities to ensure that the memorandum operates as it should. The most recent meeting took place yesterday.

There are also now ad hoc meetings between the chief executive officers of the two authorities, which provide an avenue for escalation of regulatory matters if required. I am grateful to the Gambling Commission and the FCA for their work to ensure that this important report is acted on.

I mentioned David Hammel, and I admire the work of campaign groups such as the Football Index action group and the way that it has conducted itself. I met him last year and we have had follow-up correspondence. I am taking seriously the extra evidence that Mr Hammel has submitted in relation to the Sheehan review, and I am considering, as the hon. Member for Blaydon mentioned, whether it would be appropriate and feasible for Mr Hammel’s evidence to be scrutinised by someone external to the Department.

A lot of Members mentioned the new product, KiX, which has described itself as a football cryptocurrency trading project and bears similarities to Football Index. It involves trading footballers in the form of so-called “Digital Athlete Tokens”, which are purchased with cryptocurrency. The tokens pay out a yield based on the performance of footballers. It appears that the product is in a test phase and is not currently live, nor does it appear possible to deposit currency.

The Gambling Commission is taking proactive steps in relation to KiX. It has written to the hon. Members for Blaydon, for Swansea East (Carolyn Harris) and for Brentford and Isleworth (Ruth Cadbury) to outline its approach, and it has written to my Department. The commission is currently reviewing a number of elements of the KiX product. That includes a review by its compliance and legal teams to consider whether, if launched, it would meet the definition of gambling under the Gambling Act 2005. It has also written to the individuals responsible for KiX for further information on the product and their intentions, and to highlight the consequences of launching a product that meets the definition of gambling in Great Britain without an appropriate licence.

[Ronnie Cowan]

Is the Minister saying that the Gambling Commission alone will decide whether KiX is given a licence to bring its products to the marketplace? I have a meeting with the Gambling Commission at 4.30 this afternoon and I would like to ask it that question, too.

[Stuart Andrew]

The hon. Gentleman interrupted me just before I was going to say that the commission and the FCA are already engaging to establish the details of the product and to agree the appropriate steps.

There have been reports that two individuals previously involved in running Football Index are involved in KiX. Adam Cole was the co-founder of Football Index. He surrendered his personal management licence in September 2021 while under review, and the commission reached findings of fact regarding his involvement in Football Index. Those would be considered if he were to make a new application for a personal licence.

The commission also wrote to Abdullah Suleyman, the former head of trading at Football Index, to confirm the nature of his involvement in KiX. Following the letter, he surrendered his personal management licence on Monday 22 April.

Sport: Gambling Advertising

Debate between Ronnie Cowan and Stuart Andrew

Wednesday 13th March 2024 Westminster Hall

[Stuart Andrew]

We have had this discussion before. One of the reasons that our White Paper has landed as well as it could do in a challenging policy area is that it has been developed through use of the very best evidence. I will come on to that point later, because I think there is further work to be done in this field.

The industry’s whistle-to-whistle ban has cut the number of pre-9 pm betting adverts to around a quarter of their previous level, as the hon. Member for Barnsley East (Stephanie Peacock) mentioned, and further cut the average number of sports betting adverts seen by children to just 0.3 per week. None the less, we also know that gambling sponsorship is one of the main ways children are exposed to gambling, and that gambling marketing can have a disproportionate impact on those already experiencing gambling harm. That is why the advertising rules have been strengthened since October 2022. Content that has a strong appeal for children, such as that involving top-flight footballers, and that creates a sense of urgency to gamble is banned from appearing in gambling adverts. This measure further protects children and vulnerable adults.

Following on from the gambling White Paper, we are in the process of implementing a comprehensive suite of protections, ranging from action on advertising, products and the way that gambling is provided to prevent gambling-related harms. In line with existing gambling advertising rules, as has already been mentioned, the Premier League’s decision to ban front-of-shirt sponsorship by gambling firms will commence by the end of the 2025-26 season.

I can also confirm that a cross-sport code of conduct for gambling sponsorship has been agreed by a number of the country’s major sports governing bodies, from the Premier League and the English Football League to the British Horseracing Authority, the England and Wales Cricket Board and others. Indeed, the Rugby Football League sought to build in the code’s provisions as part of its renewed agreement with Betfred. This landmark code fulfils a key commitment from the White Paper ahead of schedule, and will bind all domestic sports governing bodies to four core principles. First, all sports will ensure socially responsible promotion. Education and awareness will form a key part of all sports’ marketing activities, including in stadiums.

[Ronnie Cowan]

The Minister has just acknowledged the need to build education support. Will he acknowledge the fact of the potential damage that has been done by this product in the first place? The gambling industry cannot have it both ways; these companies are causing the damage and at the same time painting themselves as the good guys because they are helping to support people out of addiction. They cannot own both organisations.

[Stuart Andrew]

As I said, I will come on to further research that I feel we need to do, but I want also to emphasise that we are trying to do a considerable amount of work here as part of the wider White Paper reforms. In essence, we are trying to deal with 15 years of digital progress, which is quite significant.

At this point, I want to pay tribute to all the team over at the Department for Culture, Media and Sport. They are working extremely hard to meet the commitment we made to get the majority of the code done by the summer of this year, recognising that its implementation will have the greatest impact on tackling gambling harm.

The second core principle is the protection of children and vulnerable people. Sponsorship has to be designed to limit reach to children and those at risk of gambling harm, and this will see adult replica kits, as was mentioned, available without the front-of-shirt gambling logo.

The third principle is one of reinvestment into sport. The commercial income raised from gambling sponsorship will provide grassroots services that genuinely serve fans and communities.

Finally, the code will ensure that gambling sponsorship maintains sport integrity. Sponsorship arrangements will build in appropriate requirements that they do not compromise the integrity of sporting competitions nor harm the welfare of participants. Together, those principles will establish a robust minimum standard for gambling sports sponsorship across all sports.

Of course, commercial arrangements and fan-bases differ across the industry, and that is why individual sports governing bodies will also introduce bespoke arrangements to fulfil these principles in a way that is tailored to maximise their impact. Some sports, including football, intend to have their arrangements in place as early as this year ahead of the next season. Ultimately, this will guarantee that, where gambling sponsorship does appear, it is done in a responsible way and that fans, especially children, are better protected.

There is no single intervention that effectively prevents gambling-related harm, and that is why we have taken an evidence-led approach to implement a package of reforms targeted at different levels, including advertising. We absolutely recognise that advertising can have a disproportionate impact on those experiencing gambling harms. Technological advances and developments and the increasing dominance of online gambling have necessitated a doubling of efforts from us as a Government. We and the Gambling Commission are now taking targeted action to ban harmful practices and to ensure that advertising remains socially responsible wherever it appears.

The commission has recently consulted on strengthened protections to ensure that free bets and bonuses are constructed in a way that does not encourage excessive or harmful gambling, and that is in conjunction with new rules to give consumers more control over the direct gambling marketing they wish to receive. Together, the measures will empower customers and prohibit harmful marketing practices to further prevent the risk of gambling harms. The commission will set out its response to the consultation in due course.

Our holistic approach also includes action on the products themselves. We recently announced the introduction of stake limits in online slot games, as was mentioned, where we have seen evidence of elevated levels of harmful gambling. But we are also pursuing broader protections, such as financial risk checks and further strengthening restrictions on game design. I am clear that effective and innovative collaboration to get the right mix of interventions for the population as a whole and those with specific needs is required to tackle this issue.

Evidence has been a key theme in this debate, and I want to end in recognising that further work is needed in this area. A concerted effort to build the evidence base to ensure policy and regulation are able to deal with the emerging issues is paramount, and the Gambling Commission’s important work on the gambling survey for Great Britain aligns with this priority. The survey will in time provide us with a better picture of gambling behaviour and the nature of gambling-related harm.

However, developing quality evidence is also a key priority for the Government’s statutory levy. Increased and ring-fenced funding will be directed towards high-quality, independent research into gambling and gambling-related harms, including on advertising. As my right hon. Friend the Secretary of State made clear at the launch of the White Paper, if new evidence suggests that we need to go further, we will look at this again.

I again thank the hon. Member for Inverclyde for securing this important debate and all the Members who made valuable contributions. I am committed to tackling gambling-related harms and I am confident that the action we are taking will have a real impact in reducing those harms across the country. The new levy will provide us with even more evidence. As I have already committed, if further action is needed we will look at it again.