August 14, 2024

How Automation is Transforming Sports Betting | A Conversation with Novig CTO & Co-Founder Kelechi Ukah

By: Jacob Fortinsky

Introduction

The world of sports betting is undergoing a transformation. Just as the rise of algorithmic trading and quantitative analysis has reshaped the stock market, the advent of automation and data-driven decision-making is changing the game for sports bettors and bookmakers alike. As the industry evolves at a crazy pace, it's crucial for bettors of all stripes—from seasoned sharps to casual dabblers—to understand how these powerful new tools are shaping the competitive landscape.

In this article, we'll take a deep dive into the current state of affairs in sports betting markets, examine the key drivers behind the rise of automation, and explore the implications for bettors and operators as the industry hurtles towards an increasingly algorithm-driven future. Along the way, we'll draw on insights from my friend and Co-Founder, Kelechi Ukah, CTO of Novig, to paint you a picture of where the world of sports betting is headed - and what it means for anyone looking to stay ahead of the curve.

So whether you're a tech-savvy bettor looking to sharpen your edge, an industry professional trying to make sense of the changing tides, or simply a curious observer of the space, read on. The future of sports betting is unfolding before our eyes, and it belongs to the innovators, the data hounds, and the relentless seekers of an edge.

Make sure to also check out the full episode with my Co-Founder Kelechi here:

The Current State of Sports Betting Markets

To understand where sports betting is going, you have to take stock of where we are at today. The current ecosystem boasts a diverse cast of characters - from casual bettors placing a few bucks on their favorite team to the seasoned professional bettors who approach the game with all the intensity of a Wall Street trader.

At the center of it all sit the sportsbooks and betting exchanges, the market makers who set the odds and facilitate the flow of wagers. Traditionally, oddsmaking has been a blend of art and science, with teams of linemakers poring over reams of data and relying on their own hard-won experience to find the true probability of a given outcome. But as Kelechi notes, the level of sophistication can vary widely depending on the sport.

"Some sports are far more conducive to the process of simulation, estimation, risk adjustment and sizing," he explains. In other words, the more data-rich the sport, the easier it is for bookmakers to lean on algorithmic models to set razor-sharp lines.

The result is a bifurcated market, where the most popular and heavily bet sports like football and basketball have grown increasingly efficient, while more niche offerings can still harbor pockets of inefficiency able to be exploited by savvy bettors. Still, the overall trend is clear: As the global sports betting market continues its relentless growth - Statista projects it will top $140 billion by 2028 - the margins for bettors and bookies alike are growing ever tighter.

The Rise of Automation in Sports Betting

Enter the machines. The past decade has seen an influx of quantitative talent into the world of sports betting, as mathematicians, data scientists, and engineers from the world of finance and tech have begun to turn their analytical genius on the challenge of beating the book. This surge in brainpower has fueled a rapid acceleration in the development and deployment of automated betting systems and algorithmic trading strategies.

Forward-thinking operators are already opening up their platforms to algorithmic players, providing APIs and data feeds that allow bettors to plug their models directly into the market. This democratization of data and tools is poised to accelerate the trend of automation even further.

But it's not just the bettors getting in on the automation game. Sportsbooks and betting exchanges are also locked in a constant arms race to harness the power of data and algorithms to sharpen their odds and manage their risk. In a world where fortunes can turn on a single injury report or weather forecast, the ability to rapidly assimilate new information and adjust prices accordingly has become a key competitive differentiator.

For those with the skills and the risk appetite to keep pace, the rewards could be substantial. But in a market where the machines are always one step ahead, the risks of getting left behind have never been higher. As the sports betting industry continues to evolve at a breakneck pace, the question is not whether automation will reshape the landscape, but rather who will be best positioned to capitalize on the opportunities it presents.

The Benefits and Risks of Sports Betting Automation

For bettors, the rise of automation holds both promise and peril. On the one hand, the growing prevalence of algorithmic trading should, in theory, lead to more efficient markets and better prices for everyone.

As Kelechi pointed out:

"The more people that are doing that, the more quickly markets achieve price discovery, the more efficient markets become."

In a hyper-competitive market where algorithms are constantly sniffing out and exploiting even the smallest inefficiencies, the odds should, on average, more accurately reflect the true probabilities of a given outcome.

But there's a darker side to this algorithmic arms race. As betting markets grow ever more automated, the gap between the haves and the have-nots - those with the technical chops and computing power to deploy sophisticated betting bots, and those without - will only widen. For the retail crowd, the dangers of getting picked off by a faster draw have never been higher.

The rise of automation raises thorny questions about the potential for market manipulation and systemic risk. In a market increasingly dominated by algorithms playing by their own rules, the risks of flash crashes or runaway feedback loops - while perhaps remote - can't be discounted entirely.

The Importance of Combining Quantitative Skills with Sports Knowledge

So what's an enterprising bettor to do in the face of such upheaval? The key, according to Kelechi is to cultivate a hybrid approach that marries quantitative chops with deep domain expertise.

"If you're someone who has a deep background in data science and mathematical modeling and game theory, market microstructure, et cetera, you'll do very well," he says. "But you really do need the combination of them both to really succeed."

In other words, blindly trusting the algorithms is a recipe for disaster. To truly gain an edge in today's hyper-efficient betting markets, you need to be able to contextualize the data within the unique contours of each sport. A model that works gangbusters for predicting NFL point spreads might fall flat when applied to Croatian soccer.  The sharpest operators are the ones who can seamlessly toggle between the abstract world of statistical analysis and the gritty realities of on-field matchups and coaching tendencies.

Of course, cultivating this kind of dual mastery is easier said than done. But for those willing to put in the work - to dig deep into the data while never losing sight of the human element of the game - the potential rewards have never been greater.

Conclusion

As the world of sports betting hurtles towards an increasingly automated future, it's easy to feel a sense of vertigo. The sheer speed and scale of the changes reshaping the industry can be dizzying, even for seasoned veterans of the game.

But while the rise of the machines may be disruptive, it need not be dispiriting. After all, sports betting, at its core, has always been a game of skill, a constant jockeying for position between those who can see just a little bit further than the rest. The tools may be evolving, but the underlying challenge remains the same: How do you identify and exploit inefficiencies in a hyper-competitive market?

For bettors willing to embrace the power of data and algorithms while never losing sight of the human intangibles that make sports so compelling, the future is bright. Yes, the competition will be tough. But for those with the right mix of quantitative savvy and sports IQ, there will always be opportunities to find an edge.

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What is Novig? How does Novig work?

Novig is the first prediction market for sports. We were tired of betting against sportsbooks that take 10% cuts of winnings and limit/ban winning users, so we built a peer-to-peer exchange where you compete directly against other users in the Novig community rather than against the house.

When you place orders on Novig, you are weighing in with your own knowledge, research, and opinions on sports events, so the odds on our platform reflect what the Novig market believes is the fair value of a given event. We are distinct from traditional sportsbooks in that we allow users to offer their own odds (ie, name your own price) if you don’t like the market odds, which you can do by placing a “Make Order” on the Order Slip.  

We have two different modes: Novig Coins and Novig Cash. Novig Coins are unredeemable and are used to play for fun, and Novig Cash is a virtual currency that can be used to enter sweepstakes for the chance to win cash prizes. No purchase is necessary for Novig Cash.

What’s the difference between Novig Coins and Novig Cash?

Novig Coins are used to play for fun. They provide the opportunity to express one’s predictions on sports events, win more Novig Coins, and compete against the Novig community. Novig Coins can be purchased in the Novig App, and they can be claimed daily or when one’s balance is below 100 Novig Coins. They are unredeemable and non-transferable. 

Novig Cash is a virtual currency that is used to participate in Novig's sweepstakes. Novig Cash is free to claim and Novig Cash won from gameplay can be used to enter additional sweepstakes or redeemed for cash prizes, subject to eligibility verification, minimum and maximum redemption limits, and all requirements in the Sweepstakes Rules and Terms of Use.

It can be collected for free as a bonus with purchases of Novig Coins or via one of our alternative methods of entry. No purchase is necessary to obtain Novig Cash. Please see our Sweepstakes Rules for complete details. 

What happens if I win Novig Cash?

If you win Novig Cash by participating in sweepstakes games, you may redeem the Novig Cash for real cash prizes, subject to minimum and maximum redemption limits, but you must verify your eligibility and comply with all requirements, in accordance with our Terms of Use. The current minimum redemption of Novig Cash is $20, and the current maximum redemption of Novig Cash is $5,000 for a single redemption and $10,000 per day, except in New York and Florida where the maximum daily redemption is $5,000.

What are sweepstakes?

Sweepstakes are promotional games with prizes for the winners. They are used to promote the sale of products — in our case, Novig Coins — and have been legitimately used by businesses in the United States for decades. 

Unlike traditional sports betting where you wager real money on sports outcomes, sweepstakes involve no real money gambling. A sweepstakes is a game of chance where participants can win prizes without any requirement to make a purchase. Participants use Novig Cash to play sweepstakes games for the chance to win prizes.

Why use Novig instead of traditional sportsbooks?

We are the platform where winners play. Our research indicates that players are over 10x more likely to win on Novig compared to our competitors. On other platforms, if you are consistently winning, you are likely going to get limited or frozen out entirely. At Novig, winners are welcome. 

We also offer faster in-game trading, more transparency, and a number of innovative features like Make Orders, liquidity screens where you can view multiple levels of the Order Book, position tracking, and a generous rewards program.

What markets does Novig offer?

We offer moneyline, spread, totals, and player prop markets in NFL, NBA, NHL, MLB, NCAAF, NCAAB, NCAAW, and WNBA. In the coming months, we will expand our offerings to include other sports (tennis, UFC, golf, soccer) parlays, SGPs, and other exotic markets.

Is Novig legal?

What does it mean to “set your own odds”?

On Novig, you don’t have to just take the odds that the market is offering. You can set your own. 

For example, let’s say you want to put 1000 Novig Coins on the Cowboys to win against the 49ers and you see that the best odds are currently -330 for 49ers and +240 for the Cowboys. Instead of just taking the Cowboys at +240, you can change your Order type to Make on the Order Slip, and enter in whatever odds you’d like, say +300. 

Those odds are then offered to the rest of the Novig community so the 49ers odds would update to -300 and when another player on the app takes the other side, you will be notified that your order is filled and your payout would be 4000 Novig Coins, instead of 3400. If your order remains unmatched, it will be canceled automatically when the game starts, or you can cancel it from the Portfolio screen at any time and the Coins will be returned to your wallet.

Where is Novig available?

Novig is available to users 21+ across the United States, except in the following states: AL, CO, ID, LA, MI, MT, NV, and TN. Eligibility may vary month-to-month, and you are responsible for determining whether you are located in an eligible jurisdiction. For more information on eligibility and availability, see our Terms of Use and Sweepstakes Rules.

How does Novig actually make money?

It's a great question and one that gets to the heart of how we're different from traditional sportsbooks. Our revenue model is actually quite simple. We make money in two ways.

First, we act as a market maker on our own platform. That means in addition to letting users trade directly against each other, we're also providing liquidity and acting as a participant in the market. This helps keep markets active even when user liquidity is low and solves the “cold start problem” from day one. 

In other words, if you want to participate in a niche market where there isn’t any counterparty, we will serve as the counterparty. In the most liquid markets — like NFL moneyline markets — we expect the vast majority of trades to be directly peer-to-peer where we don’t take a cut, but in less liquid markets, we expect most trades will be against Novig, where we will have 1-4% spreads. 

Second, for our highest volume users - think professionals and hedge funds - we have a fee structure. But for the vast majority of users, we're not taking a cut at all. When two users play against each other, we're not touching the winnings. That means if you put up 100 Novig Cash and your buddy puts up 150 Novig Cash, the winner gets 250 Novig Cash, whereas on virtually any other platform the house would take 8-10% of the winnings, so you’d only get 230. 

This is a complete paradigm shift in the industry. We're the only platform in the world that doesn't take a cut from most of our users' winnings. It's a game changer, and it's at the core of our mission to build the fairest, most transparent platform possible.

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