Footstock Goes Belly-Up as Football Index Domino Effect Rips Soccer Trading
Posted on: March 29, 2021, 06:43h.
Last updated on: March 29, 2021, 02:20h.
Soccer trading platform Footstock announced Friday it had entered insolvency proceedings. The move comes just four weeks after the demise of Football Index, a site whose business model it emulated.
In an announcement to players, the Germany-based platform said on its website it had surrendered its UK gambling license and ceased trading “with immediate effect.”
The company blamed the recent collapse of Football Index for “significant setbacks” and “unprecedented circumstances that have crushed our company in this crucial period of growth.”
“Expected and necessary funding being put on ice, we can no longer run our Seedrs campaign, and valuable partners are pausing cooperations,” it said.
Like Football Index, Footstock billed itself as a combination of fantasy sports, betting, and stock-market speculation. Users would trade “shares” in professional soccer players, whose value would fluctuate based on metrics like on-pitch performances or real-world transfer market value. Users would receive “dividends” based on the performance of their shares.
Panic is Contagious
But there is some debate about whether this business model could ever be sustainable in the long-term, since it relies on a constant influx of new liquidity from new players. Critics have compared the model to a Ponzi scheme that was destined to implode.
On March 4, Football Index announced it was slashing dividends to ensure the “long-term sustainability” of the platform. Panic-selling ensued, causing the price of shares to nosedive overnight.
According to The Times, Football Index’s players collectively lost around £90 million ($125 million) in 24 hours.
Footstock makes no mention of its users losing money and blames its financial disarray on expected funding falling through. But it’s hard to believe that user anxiety triggered by the Football Index crash is not responsible. Panic is contagious, after all.
One Twitter user described “waking up to a #Footstock collection value of £0.00 when it was over £200 yesterday, and being told I have no cards when I have over a hundred.”
“Insane, that this is allowed to happen,” they continued. “Daylight robbery.”
While Footstock and Football Index are required to keep customer funds separate from operating funds as a condition of their licensing, the UK Gambling Commission offers no extra protection to those funds in the event of an operator’s insolvency.
The commission has been criticized for failing to examine the viability of Football Index’s business model during the licensing process. Many believe the operator should have never been licensed at all.
“What was the Gambling Commission doing the times when this dreadful practice was exploiting and conning punters?” Labour MP Carolyn Harris asked The Athletic earlier this month.
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