An independent review of the regulation of the failed betting site Football Index – the self-styled “football stock market” – has heavily criticised the actions and attitude of both the Gambling Commission and the Financial Conduct Authority (FCA) before FI’s collapse in March, which left at least £90m of users’ stakes trapped in the platform.

The Department for Culture, Media and Sport (DCMS) appointed Malcolm Sheehan QC, a specialist in product liability and group actions, to review the regulation of Football Index in June. His report, published on Wednesday, reveals profound ignorance of the platform’s structure and business model on the part of the Gambling Commission, and a reluctance by both regulators to take adequate responsibility for protecting the site’s users.

Related: Football Index: customers' money trapped after platform is suspended

Football Index operated under a licence from the Gambling Commission, which regulates sports betting products. However, its website mirrored a stock exchange, offering customers a chance to buy “shares” in leading footballers which returned “dividends” based on their performance on the pitch. As a result, it could have fallen under the remit of the FCA, which regulates investment and share-trading platforms.

Sheehan’s review reveals that, while the Commission initially licensed Football Index, via its parent company BetIndex, in 2015 on the basis that its “shares” were bets which expired after three years, the regulator became aware that the site also had “stock market functionality” only in March 2018. The review also finds that “from the time when the Commission first became aware of the full nature of the Football Index product in early 2019, a significant amount of time was taken whilst the Commission sought a greater understanding of what was undoubtedly a novel and … complex product.” Sheehan concludes that “nearly two years … between 2019 and the suspension of BetIndex’s licence in March 2021 was too long.”

The FCA, meanwhile, took four months to respond to a request from the Commission in May 2019 for an opinion on whether the Authority should have a regulatory role.

Then, having suggested in September 2019 that “dual-regulation” by both bodies would be appropriate, the FCA changed its mind, telling the Commission that “it would not regulate part of the product”. While the Authority later warned BetIndex that “the whole BetIndex product was likely to fall within the FCA’s remit”, it “did not obtain external legal advice from leading counsel until after BetIndex’s gambling licence had been suspended”.

In the meantime the Gambling Commission ignored warnings that Football Index’s business model was flawed and that customers’ money could be at risk. These included a complaint by a competitor in January 2020 that the platform was “an exceptionally dangerous pyramid scheme under the guise of a football stock market” and that urgent action was required “to alert and protect users”.

Sheehan’s recommendations for the Commission include a need for “prompter decision-making and action”, the “prioritisation of novel products for enhanced regulatory scrutiny” and “continuing scrutiny of divergences between described and actual features of a product”. In addition to speeding up its decision-making, Sheehan sees a need for “consistent decision-making across different departments within the FCA” and “better co-operation with the Commission”. His findings will also be studied closely by lawyers at the specialist group-action firm Leigh Day, which is investigating possible claims for compensation on behalf of a number of former Football Index customers who lost significant sums when the platform collapsed.

Responding to the review, Andrew Rhodes, the Gambling Commission’s chief executive, said the regulator had “already acted on a number of recommendations in the report”, adding that its “actions were always focused on trying to protect consumers while we sought to bring the operator into compliance with regulations.”