You can bet on practically anything at Betfair.com. Politics, Pop Idol, the Danish Women's Handball League: wherever there is a contest, Betfair offers you the chance to make a profit. Every day, millions of pounds move in and out of its website, where the homepage proudly declares itself "the world's largest online betting company". Yet only four years ago, Betfair did not exist.

It is, by a distance, the largest internet betting exchange, offering a service to punters which has already taken horseracing by storm. In essence, exchanges bring backers together to swap bets. You can back a horse or a football team in the usual way, taking the best odds on offer on the site. Or, crucially, you can act as a "bookmaker", offering odds to other users about an event. And herein lies the potential for abuse.

There have been a succession of inquiries by the Jockey Club into irregular betting- exchange patterns around horse races, most recently last week into a runner at Ludlow (see panel).

On Sunday it was revealed that the problem may have spread to tennis: the Associa tion of Tennis Professionals said it had asked Betfair for records after discovering that bets of up to £80,000 were being placed on individual matches and that there had been irregular patterns around matches involving players not in the top 100.

If there can be problems in racing and tennis, how long before they extend to other sports, in the same way that spread betting affected cricket and football matches about five years ago?

The fundamental change in gambling is that anyone can now make money from a horse, or a player, or a team not winning by offering odds on the website and collecting the money when he, she or it fails. All well and good. Except for a suspicion that people who know a horse, or a player, or a team is going to lose are offering odds on Betfair and then cleaning up when that does indeed happen.

When acting as bookmaker on Betfair, you must pay out at the odds offered if the punters win. If they lose, you get to keep the stakes. Betfair simply acts as a broker, matching people who want to bet with people prepared to offer odds and bringing them together on its website. It makes its money by charging commission on winning bets.

And Betfair is a business which is growing fast. Since it opened its virtual doors for business in 2000 it has signed up more than 100,000 customers in 80 countries, and the total is climbing all the time. Racing remains its core business but its markets on football, cricket, rugby, golf, snooker and so on are attracting increasingly large amounts of money. Betfair's homepage claims turnover of £50m a week, but many observers believe that to be a highly conservative figure.

Exchanges make many thousands of punters very happy, but they also raise obvious issues of integrity, and the possibility that individuals, including players, may be able to profit from privileged "insider" information.

And there may also be opportunities for a sportsman to make a killing by "lying down". Consider, for instance, a tennis player who is ranked in the mid-150s playing in the first round of a minor tournament. If he, or an accomplice, logs on to Betfair, takes all the money available on him winning, and then he loses the match, it could be worth more than the prize-money cheque for success.

The administrators of many sports, though, seem oblivious to this new arrival in the gambling market. Yesterday spokesmen for the Football Association, the Rugby Football League and World Snooker all admitted their ignorance of the existence of betting exchanges, but insisted that current rules prohibiting betting by players were adequate to deal with any potential threat to their sport's integrity.

At the International Cricket Council the rise of exchange betting has been noted, but again the sport's rulers seem untroubled.

"We're obviously aware of evolution that takes place in betting," said Brendan McClements, the ICC's director of communications, "but it's not sufficient cause for concern to review the processes we have in place.

"Obviously, given the experiences of cricket's recent past, we now have a system of education, legislation and regulation to protect the game from the threat of corruption. We are aware of [betting exchanges] but we believe our current approach to corruption issues is sufficiently strong to deal with it."

Betfair seems to be a blind spot for many sporting bodies, perhaps because they do not understand betting in general and exchanges in particular, or because they simply do not realise how much money is now being wagered on betting exchanges.

The Jockey Club, though, has already moved to sign a "memorandum of understanding" with Betfair, granting its security department access to the identities and betting records of Betfair's punters when a race produces unusual betting patterns.

The move followed a number of well-publicised incidents in the sport in which horses with an apparently solid chance on form drifted to no-hoper prices in the pre-race betting and then ran unaccountably poorly. This month the Association of Tennis Professionals also signed an MOU with Betfair.

Mark Davies, Betfair's spokesman, believes that similar agreements with other administrative bodies are almost inevitable. "We will be happy to sign an MOU with any sporting administrator that wants to," he said. "It's not for Betfair to assess whether there is corruption in sport, it is for the people who police the sport to make that judgment, but they must have access to information that will help them reach a decision."

As exchange betting continues to plot an exponential growth curve, the Danish Women's Handball League may soon feel the need for transparency too.