A group of MPs has written to Culture Secretary Oliver Dowden calling for a public inquiry into the collapse of gambling website Football Index.
They say it is "a scandal" and shows the need to reform the gambling sector.
The firm has suspended operations and appointed administrators, sparking an outcry from punters whose money is still locked up in the business.
There are reports gamblers could lose more than £90m, with some now seeking legal advice about possible claims.
In their letter, the MPs on the All-Party Parliamentary Group for Gambling Related Harm estimate that Football Index punters have lost £3,000 each on average.
"This can only be termed a scandal," said chair Carolyn Harris. "It underlines the need for wholesale reform of the gambling industry and raises significant questions of the Gambling Commission, given they saw fit to licence this platform and failed to enact adequate oversight."
Not only does there need to be a urgent inquiry, it is more evidence of the need to create a Gambling Ombudsman to help protect consumers, she said.
'I feel stitched up'
Ben, aged 22, estimates the collapse in the value of his Football Index portfolio will cost him close to £6,500.
"I feel embarrassed and cheated," he told the BBC. "The crash has affected me mentally."
He lives at home and has no dependents, so thinks he got off lightly. "There are people out there with families who have been hit a lot worse; lost far more than me.
"I'll never trust Football Index again. I will go elsewhere and enjoy my love of football with other companies and probably bet in a more conventional way. But it will make me think twice before putting money into other companies.
"Everyone affected by this wants to say how disappointed they are with the leadership of Football Index." Punters feel the company has "stitched up their loyal fan base", he said.
Football Index hit serious financial problems earlier this month. The company cut dividend pay-outs on players, sparking a crash in their "share" price value.
This change in the terms and conditions meant the value of gamblers' portfolios plummeted, with many users taking to social media to report losses of thousands of pounds - even tens of thousands.
Several punters contacted the BBC with reports of the impact on their finances, and called for action against the company and the regulator, the Gambling Commission.
A group of gamblers has formed an action group, and on Tuesday it was announced that law firm Leigh Day is looking into possible legal action against Football Index parent company BetIndex on behalf of the thousands of people who have lost money.
Leigh Day partner Nichola Marshall said the role of the Gambling Commission will also come under scrutiny.
Ms Marshall said: "Whilst it is very early days in our investigations on behalf of the thousands of people who have lost money, there are serious questions which will need answering regarding what has happened at Football Index and what the Gambling Commission understood of Football Index's activities."
Matt Zarb-Cousin of the Clean Up Gambling campaign, who is working with Football Index customers and Leigh Day, said: "Football Index ended up in a situation where they needed new customers to honour the dividend payments to existing users.
"It was a business run in an entirely unsustainable way, which people do not expect of a licensed operator in a regulated sector. The Gambling Commission has been asleep at the wheel."
What is Football Index?
Fast-growing Football Index launched in 2015 and allowed users to buy what it called "shares" in professional footballers. The firm paid users "dividends" according to player performances.
If a player performed well or transferred to a bigger club, the transfer value went up and so did the "share price".
The aim for users was to identify rising stars, buying shares in them while still relatively cheap before selling at a profit after their values rose.
Football Index called itself a "challenge to traditional bookmakers" and an alternative to the regular stock market which it said could "seem intimidating and inaccessible".
But although it used the terminology of the stock market, Football Index was regulated by the Gambling Commission, not the Financial Conduct Authority.
In an update on Tuesday about the administration, BetIndex said it still hoped the company could "be rescued as a going concern". It added: "Our priority is to safeguard the interests of our customers and to seek the best outcome for our community with the goal of continuing the platform in a restructured form."
The BBC has asked the Gambling Commission for comment. Last week the regulator said it was carrying out its own inquiries, pointing out it had concerns Football Index was not operating "in accordance with a condition of its licence".