That Sydney Sweeney ad was a distraction from a worrying question: what does Novig do?

Sydney Sweeney grabs headlines and creates controversy. That’s what she does and she’s good at it. So much so that the debate in recent weeks over her billboard advertisement for Novig centred on whether it was offensive to female athletes or was empowerment by profiting off her looks.That was music to the ears of the people paying Sweeney because it distracted from a much more worrying question: what exactly does Novig do?Novig is a prediction market, which is a lot like conventional gambling except that prediction markets can cover a far broader range of topics while operating without the comparable range of guardrails you’d expect from a Paddy Power or Boyle Sports.There’s a chance you’ve heard of Polymarket, the best-known operator in this space, along with Kalshi, another prediction market. These present themselves in the US as forms of financial exchanges rather than betting services.READ MOREThis enables them to get around the issues in some US states, such as California, where gambling online is still prohibited. The contract is ostensibly between two participants on the exchange, with users trading contracts based on whether or not something will happen.Sydney Sweeney’s ads became a massive talking point online and generated thousands of column inches. Photograph: Michael M Santiago/Getty Despite presenting themselves as financial products, sports betting has comfortably become the most popular aspect of these platforms, as made altogether clear by Sweeney’s ad.The problem is that these platforms are far more open to abuse and insider trading. A physiotherapist of a football team could have access to non-public information about an injury. They could then suggest a market get set up on whether that player will be in the starting line-up the following Saturday. If the platform approves it, they have the chance to rake it in before the news becomes public.[ ‘World’s largest’ betting website closed to Irish users after regulator action ]On conventional betting sites, such occurrences are rare for a reason. It’s in the interest of sportsbooks, even those with exchange models, to reduce market manipulation to a minimum.Traditional betting companies have to worry about regulators for starters, plus market manipulation is generally bad for their bottom line. Furthermore, reputation matters to them and there’s nothing worse for a brand in this sector than being considered a crooked book.For prediction markets, that really isn’t top of their mind. The core goal, be it Novig, Polymarket, Kalshi or any other upstart, is volume.That makes celebrities, particularly the ones being chosen, endorsing these products a tad concerning.LeBron James: Before his partnership with Polymarket was announced, about $250m had been wagered on prediction markets about which team he would sign for this season. Photograph: Luke Hales/Getty Sweeney is far from alone in this regard. LeBron James, arguably the greatest basketball player of all time, will be paid more by Polymarket ($15 million, equivalent to €13.2 million) this season than by the Philadelphia 76ers ($4 million), the NBA team that employs him.Before his partnership with Polymarket being announced, about $250 million had already been wagered on prediction markets about which team James would sign for this season.Giannis Antetokounmpo, another star in the NBA whose fan base trends younger, is a shareholder in Kalshi. While he’s still an active player, he has been prohibited from trading on NBA markets entirely because of the risk of insider trading.It’s not just basketball. Croatian footballer Luka Modric became a global ambassador for Kalshi just two days before his first game at the World Cup. Golfer Bryson DeChambeau is also an investor in Kalshi. The actor Timothée Chalamet has also signed a deal with Kalshi.Timothée Chalamet before the World Cup final in July. Research has shown young people are influenced by celebrity endorsements of gambling. Photograph: Maja Hitij/Getty Novig was a nobody, in effect, before Sweeney’s ads went viral online and generated thousands of column inches worldwide.Sweeney wasn’t chosen as to whether she’s a fair reflection of a female athlete, but because a great deal of men in the age 18-35 demographic are quite interested in seeing her in various states of undress. Shocking, I know.All these celebrities are being snapped up by these businesses for a simple reason. The British gambling commission’s research last year produced a paper saying that young people aged 11-17 were influenced by celebrity endorsements of gambling products.James, Modric and Antetokounmpo add credibility to younger fans by being current stars active in sports that generate an awful lot of betting business.All this would be unpleasant but tolerable if the same fundamental protections associated with sports betting were in place with prediction markets.A sports bettor can trust that, even though they will more likely lose than win, there’s a fair exchange happening whenever they bet. If that fair exchange doesn’t happen due to match or spot fixing, the risks for those engaging in it are enormous.That’s simply not the case with prediction markets. Here we have James and Sweeney presenting a more sophisticated approach to betting for a younger generation, which just happens to be far more open to abuse.The White House even got caught up unexpectedly in the controversy over prediction markets. Photograph: Al Drago/Getty This isn’t just a theoretical problem. There have already been brazen abuses of the system. In August, the United States Commodity Futures Trading Commission issued a fine of more than $170,000 against the White House teleprompter operator.The operator was using advance knowledge of speeches by Donald Trump and betting on what would be said in them. The market used was Kalshi, but the issue is across the sector.At their core, prediction markets enable someone to bet on a behaviour or have a proxy do so for them – and then they or the proxy enact that behaviour.That was at its most visible just over a year ago when an “epidemic” of sex toys hit the WNBA, the biggest women’s basketball league in the world.News that sex toys were being hurled on to the court at games made news globally. What was less reported was how much of a role prediction markets had in stoking the fires of the trend. About $3 million worth of bets were placed over a period of about a week last year on Polymarket over whether or not sex toys would be thrown on the court during WNBA games.[ How a global gambling empire used Ireland to exploit addicts ]Traditional sportsbooks are far from angels, but at least they have reason to fear getting involved in behaviour like this. That simply isn’t there for prediction markets at present.Reports emerged this week that Polymarket is considering Ireland for its European hub. In July, Polymarket geo-blocked Irish-based users from placing bets. This came after the Gambling Regulatory Authority of Ireland wrote to the website to inform it that predictive markets providing betting activities were remote betting intermediaries under Irish law and required a licence. Kalshi is also geoblocked here, while Novig is only open to US customers at present.The next logical step for these businesses is the European Union, although it is likely that will hit regulatory hurdles beyond just Ireland. Getting clearance in the EU won’t be easy and, frankly, might well prove too onerous a task to be worthwhile.The European Securities and Markets Authority indicated that prediction markets may qualify as betting markets or financial instruments. In either event, the regulatory barrier is far higher than anything being faced by these companies in the US.By EU standards, Ireland has a stringent gambling regime. It’s not just gambling regulation Polymarket et al have to worry about as these products may be classified as financial instruments.The larger EU countries that prediction markets would like to target have already closed the doors. The gambling regulator in France ordered internet service providers to block access to prediction market sites in July. Spain’s equivalent took similar action in May, opening legal proceedings against Polymarket and Kalshi. Germany’s regulator said in August that anyone using social betting, essentially the non-sports bets made popular by prediction markets, may be committing a crime.The EU is all but off-limits. For now, at least, the US remains the wild west by comparison.