The UK Gambling Commission has apologised after an independent report slammed the regulator for not acting quickly enough to scrutinise soccer trading platform Football Index before its collapse.
The report into the regulation of Jersey-based BetIndex, which ran the Football Index site, found that the Gambling Commission could have worked "faster to better regulate" the service.
Andrew Rhodes, chief executive of the Gambling Commission, said: "No amount of explanation of what happened to Football Index will take away the justifiable hurt and anger its customers are experiencing having lost, in some cases, life-changing amounts of money when the gambling company collapsed.
"We accept and agree that we should have drawn a line under our efforts sooner, but this does not mean those customers would not have lost money in the event of the BetIndex company collapsing."
He added: "The review provides a number of helpful recommendations for how both regulators can work better together and for how our regulatory approach deals with novel products.
“Our actions were always focused on trying to protect consumers while we sought to bring the operator into compliance with regulations.”
The commission pledged to make changes to the way it regulates innovative digital gambling products in light of the Football Index saga, during which it has faced widespread criticism over its role.
It has, together with the Financial Conduct Authority (FCA), agreed steps to improve ways of working, including a strengthened memorandum of understanding and methods to identify and quickly overcome regulatory impasses.
The report concluded that although the FCA was never responsible for regulating the index, there were still "areas for improvement", including how long the FCA took to respond to requests from the Gambling Commission.
The commission has also agreed to update how it assesses the risk of innovative products, including tighter rules on how they are described and making it clearer for consumers where products are gambling, rather than investments.
Among the concerns raised in the damning report are claims that there were no alerts within BetIndex to identify problem gambling, a reliance on churn of customers to keep the business going and the delay between regulators becoming aware of problems and taking action.
The report also looks at whether more should be done to ensure gambling firms that offer long-term bets are able to cover payouts.
Football Index — where investors could bet on the success of footballers — went into administration in March, leaving around 280,000 customers out of pocket by around £3.2m.
The report comes as the Gambling Commission is already under increasing pressure.
A parliamentary group, the All-Party Betting & Gaming Group, launched an inquiry into the commission earlier this week, after it said it had received numerous criticisms about the watchdog from members of the industry.
Gambling minister Chris Philp said: "We have been clear that we must learn lessons to make sure a situation like this does not happen again.
"I'm encouraged to see the Gambling Commission and the FCA are taking concrete steps on an action plan on how they will better work together.
"We will ensure that the findings from this review feed directly into our ongoing Gambling Act Review which is looking at ways we can improve regulation of the gambling industry."
In April, former gambling minister John Whittingdale announced a review into the circumstances surrounding the collapse of Football Index.
Payouts to customers were approved in June after the High Court heard that BetIndex maintained a client money bank account of around £4.5m for the benefit of its customers under the terms of a trust.
Paula Lee, a partner at Leigh Day who is working on behalf of thousands of BetIndex customers, said: “We welcome a ‘lessons learned’ approach, but the government cannot use this to absolve itself from responsibility for harm suffered.
"Compensation for those who lost money through the collapse of Football Index must be an absolute priority.”
Campaign group Clean Up Gambling tweeted: “Government can’t allow Football Index users to be treated as collateral damage for regulatory failure on their watch: years of poorly resourced, inadequate regulation that’s failed to uphold consumer protection.”