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How Nasdaq’s punt on Football Index became a lost bet

In 2019 Nasdaq celebrated a deal to provide technology to betting start-up Football Index by posting an interview on its website with British founder Adam Cole.

The $24bn US exchange group did not stop there: Football Index’s logo and Cole’s face were also displayed on a digital billboard outside the seven-storey Nasdaq tower in New York’s Times Square, highlighting its push to provide tech to groups outside financial services. 

Two years on the picture is very different. Football Index has collapsed into administration, furious punters have been blocked from withdrawing their funds and the company’s image of itself as a stock market for the sport lies shattered.

Meanwhile, Nasdaq has quietly removed the interview, part of a “Meet the Innovators” series, from its website according to internet records seen by the Financial Times.

Although the Nasdaq trading tech was not the reason why Football Index collapsed, the affair has underlined the risks of associating with the betting industry, which carries laxer regulation than the financial sector. 

“Nasdaq have questions to answer as to what their precise involvement was with Football Index [and] need to explain why they partnered with them,” said Matt Zarb-Cousin, director of campaign group Clean Up Gambling. “Are they distancing themselves from it now?” 

Football Index used the language of markets and investing to attract more than just Nasdaq. Addressing customers as “traders”, it told them they could earn “dividends” — and later compared its efforts with those of a central bank when it sought to reassure them about the effects of Covid.

In the Nasdaq interview, Cole said the company was “creating ‘recreational markets’ to sit alongside [the] ‘financial market’” to attract customers, who benefited from individual player performance instead of match outcomes. 

Despite operating its own regulated stock exchanges in the US and Europe, Nasdaq said almost two years ago that Football Index allowed clients to “buy and sell shares in professional footballers”. 

The association with Nasdaq “definitely added a veneer of legitimacy to the operation and provided a lot of reassurance to traders on the site”, said Zarb-Cousin.

Angry users said on social media that the Nasdaq name had given them confidence in Football Index. “It was the NASDAQ link that reassured me,” one customer wrote on Twitter. Another criticised the platform for describing itself as a stock market and mentioning Nasdaq “countless” times.

Nasdaq declined to comment.

Football Index’s problems arose from changes to the so-called dividend payments on bets, with a reduction leading to a crash after customers tried to sell their positions. Some customers, whose funds are currently suspended, claim on social media to have lost tens of thousands of pounds.

The company was supervised by gambling authorities, not financial regulators. The “shares” its customers bought did not provide equity in football players. The bets lasted for three years, at which point the “shares” were meant to expire, with punters losing the original stake they spent to acquire them.

Football Index, which is the trading name of Jersey-based gambling operator BetIndex, appointed Begbies Traynor to guide it through restructuring and administration earlier this month. Gambling authorities in the UK and Jersey have suspended the company’s betting licences.

Leigh Day, the law firm, is “looking into whether there are grounds to take legal action against the platform and its creators”, having obtained the paperwork from BetIndex to understand why it decided that it was right to pursue administration. Clean Up Gambling is working with Leigh Day to support customers of the betting platform.

British members of parliament are calling for an inquiry into the collapse of Football Index, with leader of the House of Commons Jacob Rees-Mogg describing it as a “matter of concern”. The affair has shone an unwelcome spotlight on the betting industry as it faces a government review of the UK’s gambling legislation, which could lead to a crackdown on the sector and its links to sport.

Among the proposals ministers are considering is banning betting companies from being shirt sponsors for teams, a vital source of income for clubs.

Nottingham Forest and Queens Park Rangers, two clubs in the second-highest men’s division in England, were sponsored by Football Index and last week removed its logo from their shirts. The company has also advertised its product across media outlets, including in the Financial Times.

Queens Park Rangers has replaced Football Index as its kit sponsor for the rest of the season © Reuters

Nottingham Forest declined to comment. QPR said that Senate Bespoke, a construction company owned by club fan and businessman Jason Woodford, would become kit sponsor for the rest of the 2020/21 season.

Caan Berry, a professional gambler, last year warned that Football Index was a risky proposition, raising concerns whether it was akin to a Ponzi scheme in a letter to the UK Gambling Commission. “How the Gambling Commission have allowed it, I have absolutely no idea,” he told the FT.

Football Index told the FT this week: “Contrary to ill-informed claims, our business model does not, and never has, relied on new users coming into the market. Suggestions that the platform bears any comparison to a pyramid scheme are based on a fundamental misunderstanding of how the platform operates.” 

The UK Gambling Commission said on Friday last week that it had been investigating Football Index since May last year. “At that stage there were no grounds to suspend their operating licence,” the regulator said. 

But it and the Jersey gambling authorities suspended Football Index’s licences after it set out plans in early March to restructure and reduce so-called dividend payments. Punters asked why the platform had continued to issue “shares” at prevailing prices in the weeks leading up to the decision.

Following the appointment of Begbies Traynor as administrator on March 11, Football Index told the FT: “We took the very difficult decision to suspend the platform earlier this month because we were overtaken by fast-moving events. Our decision to cut dividends was taken on the best professional advice with the intention of keeping the business solvent.” 

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