Around three years ago a couple of people in Nevada, Ian Epstein and Luke Pergande got an idea to allow bettors who had live tickets from sporting events that they purchased at a Las Vegas casino, the ability to sell those tickets to others and lock in a profit. The thinking made perfect sense. If someone, say bet $100 on the Philadelphia Eagles to win the Super Bowl at 20-1 odds in October, but wanted to sell that ticket when the odds dropped to 4-1 in late December, PropSwap created that opportunity. The purchaser of that ticket could offer the ticket on PropSwap’s website for say $1,400 which would be a win for both sides. The original ticket holder would guarantee himself a $1,300 profit, while the ticket buyer would win $600 if the Eagles won the Super Bowl, which is higher than the $400 he would win by wagering on the Eagles at a sportsbook. PropSwap believed it could act as an intermediary between the ticket seller and ticket buyer (similar to Stubhub) and take a 10% fee for processing the transaction.
It sounded great but was it legal? Ian Epstein from PropSwap explained why it is and how the whole concept and company began:
"We’ve been operating PropSwap since September 2015. PropSwap became reality after an April 2015 meeting between our attorney and the Gaming Control Board. In that meeting, the GCB expressed some questions they had about PropSwap’s business model and whether or not it violated Nevada Gaming laws. Our attorney was able to alleviate their concerns and the result of the meeting was that PropSwap was “non-jurisdictional” to the Board. meaning, we did not need a gaming license in order to operate. At that point we were off and running.
PropSwap is not gambling in Nevada, it's not gambling in any of the other states we are in. It's simply the purchasing of someone else's property. People can SELL a ticket from anywhere. As long as the ticket originated from a legal, licensed sportsbook in the U.S. it can be listed for sale on PropSwap. So even though gambling is illegal in Utah and probably always will be, there are no restrictions against selling, because the wager took place at the sportsbook."
For that reason, PropSwap is excited about the opportunities on the horizon with Supreme Court in the U.S. striking down PASPA and why they believe this could help grow their business immensely.
"Obviously in 2015, legalization was not on anyone’s mind, and we felt confident we could run a viable business with Nevada being the only state to have legal sports wagering. But when the law changed and SCOTUS opened the door for any state to offer legal sports betting, it was a monumental day for the company. Because within 3 months, our market size (aka our pool of possible Sellers) grew from 1 state to now 6 states, and that number is growing. Since the decision, my co-founder Luke Pergande has re-located from Las Vegas to Atlantic City, we’ve hired an employee in Biloxi, Mississippi, and we’re looking to hire more employees in cities where legal sports betting is cropping up. The reasons for re-locating and hiring are twofold:
1) Customer acquisition. We want representatives out there spreading the word to locals, as well as striking deals with casinos. PropSwap is the secondary market, but the sportsbook is the primary market. So, our goal is to promote PropSwap inside every sportsbook possible. Which is beneficial to the sportsbook as well. Anytime someone has liquidity for something, they are going to spend more. For example, if you know you can sell your ticket on PropSwap you’re more likely to bet a 100/1 Future, knowing the ticket doesn’t need to win in order to make money, the odds just need to improve.
2) Ticket validation. At the moment, our ticket verification process is still manual. Meaning, when a customer sells a ticket and mails it into us, we still bring that ticket to the issuing sportsbook to verify that it is legitimate. All that happens is the ticket writer runs the ticket through the machine, and if it’s real, the computer says, "Event has not been determined yet." This also allows us to find out if the ticket has been reported stolen before we pay the Seller."
While ticket sellers can be located in any state, ticket buyers are restricted to 11 states that the company feels comfortable is in complete alliance with state laws, but that number will almost certainly grow as states amend their laws to address sports betting legalization: The current 11 states that PropSwap allows tickets to be purchased in are Nevada, New Jersey, New York, Illinois, Massachusetts, Pennsylvania, Connecticut, Ohio, Indiana, Kentucky & West Virginia. PropSwap is also clear that it is up to the buyers to redeem the tickets. Whether they choose to mail them in or cash in the tickets manually at the casino is their choice, and any taxes on the ticket are up to the buyers to factor in:
Taxes are withheld on winning tickets with 300-1 odds or greater and collect at least $600. Now, no sportsbook allows you to bet less than $2, so the minimum of $600 is pretty much always assumed. In terms of PropSwap, it is always the Buyer's responsibility fill out any necessary tax forms, and for them to recoup any taxes given up at the time of cashing. If someone purchases a $10 500-1 ticket for $1,000 and they only collect $3,750 because of withholdings, they can report to the IRS when they file their taxes that they only gained $4,000 on the transaction, not $5,000 which is what would be assumed by the IRS given that the original wager was $10 at 500-1 odds. Buyers are always made aware before purchasing if a ticket has original odds of 300-1 or greater. Here is a link to a ticket currently for sale, which notes this in the Seller Comments section.
I asked Ian if he considered expanding PropSwap to locations outside of the United States and particularly Canada since a large percentage of sports bettors at Las Vegas casinos come from north of the border.
"We intend on the number to grow from 11, but it will probably not be 50. As our attorney has told us, one of the first things you learn in gaming law is "stay away from Utah and Hawaii." In terms of bringing our services to other countries, I think it's something that is definitely in the cards for this company in the long-term, but no immediate plans. But sellers can be located anywhere."
While the majority of tickets that people sell are futures bets that won’t be decided for quite a while, people can sell their tickets up until the time a game is decided.
"A ticket can be sold at any time on PropSwap as long as the event has not been determined. We sold a Georgia CFP Championship ticket for over $5,000 during the 4th quarter of the Championship Game last season. Sellers control their tickets, so if they want to list a ticket for sale and update the price throughout the game then they absolutely can. PropSwap is not a sportsbook where certain bets get taken down when the game starts or the season starts. Most people view PropSwap as a "Futures only" marketplace, but that's not the case. Most of our business is done with Futures, and Futures tickets examples are the easiest way to explain how PropSwap works, but any ticket can be sold at any time. One of our main goals is to grow the Straight Bet and Parlay business, and one of the ways we accomplish that is through partnerships with sportsbooks. Everyone sitting in a sportsbook in this country should know that they have the ability to sell their ticket if they want to. And it's beneficial to the sportsbook for people to know this because they will bet more (both in frequency and dollar amounts) knowing that they have an 'out'."
It should be noted that sellers must sell the whole ticket, since selling part of it on PropSwap could be illegal, particularly if the buyer and seller are outside of Nevada at the time of the sale:
PropSwap does not allow Sellers to sell portions of their tickets for a couple of reasons according to Ian.
"(1) It could be interpreted as a new wager that is being created. PropSwap is not sports betting, because there are no new wagers being created on the platform. If someone had a Golden Knights ticket that collected $5,000 - selling half of that could be construed as a new wager on VGK collecting $2,500 being created.
2) We do not cash tickets on behalf others. The only way this could be accomplished with tickets, is for PropSwap to cash the ticket on behalf of the Buyer(s) and disperse the funds as needed. But for reasons I do not wish to get into, we do not cash any tickets for people.
We do see this a lot though, where people want to sell their ticket and lock-in the guaranteed money, but they also don't want to get totally off of their position in case the ticket wins. So, this spurred us to create a campaign called "Go For 2". Essentially, we encourage people to make 2 tickets instead of 1 when they are at the window. So instead of having 1 $50 ticket on the Knights to Win the Stanley Cup, you would have 2 $25 tickets and you would be happy to sell 1 of those, while leaving yourself some upside in case it wins."
I asked Ian if he was familiar with the current mini scandal at FanDuel sportsbook in New Jersey where a glitch allowed people to wager on the Denver Broncos in play at 750-1 when they were down by 2 points and in field goal range. At first FanDuel said it would not honor the bets, but later did. I was curious how PropSwap would address a situation where there was an obvious error in a line and a sportsbook refused to honor the bet:
"Verification is the point in the PropSwap process where we would catch this. Hypothetically, let’s say the person with the mistaken 750/1 ticket sold it on PropSwap for $20,000. We would hold onto that $20K from the Buyer until we received the ticket from the Seller. Once we received it, we would bring the ticket to the sportsbook to verify it. At that point, the sportsbook would tell us that they are not honoring the ticket. We would then return the ticket to the Seller and refund the Buyer. We will never pay out a Seller until the ticket is received and verified. This allows us to give the Buyer a 100% refund if the transaction falls through for any reason. (obviously this verification wouldn’t be possible with less than a minute to go in the game but for the majority of tickets the process would prevent fraud or invalid tickets)."
I asked Ian why anyone would use PropSwap and pay the fee rather than simply listing a ticket on Craigslist or Kijiji.
1) The verification process explained above.
2) Ease and convenience. People would rather pay more to use their credit card on the PropSwap app and never leave their couch, than haggling with someone and then having to meet the in person somewhere. It’s why StubHub still transacts $1 billion a year even though these sites exist.
Lastly I asked Ian if he was familiar with Betfair, which offers p2p betting and with UK sportsbooks who offer cash out options on undecided bets. I wondered if he saw this as a possible threat to PropSwap, considering that William Hill and Betfair are now operating in the U.S. and it’s only a matter of time before these services are available to bettors in many of the states listed:
"Yes, we are aware of the Cash Out option offered by UK books. However, PropSwap still provides an advantage over that option. Cash Out prices are consistently 25-30% lower than the market value of tickets. For example, if the Eagles are 10-1 to Win the Super Bowl at the sportsbook, the Cash Our price would probably be somewhere in the neighborhood of 20-1. Well on PropSwap, our Buyers will purchase that ticket at 10-1 (aka market value) and sometime even lower. So, if you’re a Seller, would rather cash out with the sportsbook, or take the 30 seconds to list your ticket for sale on PropSwap and get 25% more on your money? We’re pretty confident most people would answer the latter. In regards to betting exchanges like Betfair, the main advantage we provide is that no capital is required to sell. For example, we had a customer who bet $300 on the Vegas Golden Knights at 100-1 before the season. When they advanced to the Stanley Cup he ended up selling his ticket on PropSwap for $12,600. If he wanted to hedge on an exchange like Betfair by betting the “NO” that the Knights would win, he would’ve needed to put up over $10,000. Obviously a $300 bettor does not have that kind of cash."
This is indeed an exciting time for sports bettors in the United States given the repeal of PASPA and the myriad of big name sports betting companies opening up in various states. And the ability to sell tickets in advance of games being completed and locking in a profit on PropSwap just makes it that much more exciting.