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Football Index fallout doesn’t spell the end of innovation in the sector if lessons are learned

Lead partner at Poppleston Allen Nick Arron looks at what the industry can learn from the demise of Football Index

I have been a specialist gambling industry solicitor for 15 years and the Football Index collapse represents the first time I have seen the UK Gambling Commission (GC) intervene on the basis that a product has not been fair and open, as opposed to a move to protect the vulnerable or prevent crime and disorder. That is a telling indictment into the wholesale business failure that occurred in this case.

Football Index as a consumer product is finished, but there are reports of proposals to sell the software which could contribute towards repaying customers. The fact that the technology retains a value is some small consolation, not only for customers but the industry too as if there’s some interest in the code that suggests there’s some future in this type of product.

Otherwise, there’s very little that can be salvaged here. There are reports that under the proposed Company Voluntary Arrangement there will be further funds available to repay customers, but few details have been provided. There have been various figures mentioned regarding the financial position, but until the High Court hears the case, it is unlikely we will get any actual confirmation.

Despite this being the industry’s most catastrophic business failure, the concept could live on in the UK market in the form of the American Sportz Exchange, launched by Paddy Power, founder of the eponymous Irish operator. It has to be seen as a positive for the industry that with a properly managed commercial model there is still scope to cater for player demand for novel, entertaining and creative betting products that continue to bridge the gap between fantasy sports and traditional sports betting.

Undoubtedly however, things are about to get more difficult for operators and start-ups with similar ambitions.

Don’t let a bad rep stifle innovation

Customers clearly enjoyed the concept of Football Index and despite trust in that brand being eroded entirely, the industry has a duty to ensure that one of the repercussions of the response to the case is that the R&D tap does not get turned off altogether and innovation in the sector isn’t stifled entirely.

Given the blame lies squarely at the feet of Football Index, it would not be fair if the industry’s scope to develop new products is diluted significantly as a result, providing the same mistakes are not repeated twice.

UK betting and gaming PLC is a hotbed of creativity. The problem with Football Index was that the product flair was not underpinned with a sound commercial model. Those commercial frailties were exacerbated in an ultimately doomed vicious circle by the highly misleading marketing of the product.

If it was a ‘football stock exchange’ after all, the fact that it was regulated by the same framework that covers traditional gambling activity was a telling sign that the risk was identical to betting, e.g. entire stakes could be lost, which was not made clear. As such, ultra-transparent marketing communication will be non-negotiable for any party looking to launch even a remotely similar product in future. A pivot towards marketing the product in line with fantasy sports as opposed to a financial trading equivalent would be wise.

This should not clip the wings of anyone with aspirations to develop more engaging and entertaining ways to bet, it should just serve as a reminder of the extensive due diligence required to understand if similar products are viable. In any event, the Gambling Commission are going to pay far closer attention to ensure there is never a repeat.

Already, one of our clients with a non-traditional business model has been approached by the commission and that level of scrutiny looks here to stay. Even providers of far more commercially safe alternatives to traditional sportsbook betting, like pool wagering, are experiencing a level of challenge never seen in the industry to date.

It isn’t just the GC that operators should expect more rigour from – with ancillary services including banks likely to review their offering for betting clients too.

A thriving industry ecosystem has continued to meet the growing customer demand for novel ways to bet. If those involved can ensure that the future pipeline consists of safe, commercially sound and appropriately marketed products, there’s no reason why Football Index has to spell the end of creativity within the sector.

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