[toc]PropSwap, an online exchange service for sports betting slips, is spreading its wings beyond its Nevada nest and expanding into four new states.
PropSwap, you say?
Launched in 2015, PropSwap is a marketplace for live, active betting tickets.
Bettors who are stuck with unfavorable tickets can hedge their bets by selling the slips on PropSwap’s exchange. Buyers who missed a big line can lock in a better price than they might be able to find at the time.
For example, say a bettor places a futures wager on the Las Vegas Goats at 100/1. The Goats shock the world and win their first few games, and the price slips to 25/1. The bettor can list their slip on PropSwap at, say, a price equal to a 50/1 payout, both hedging their bet and providing an opportunity for buyers that would not otherwise be available.
“I post a slip for sale, a buyer writes them a check, the seller is happy — they don’t have to be sweating the game Sunday, and they get a nice chunk of change,” co-founder Luke Pergande said in an interview with the Las Vegas Review-Journal.
The idea came to life following a 2013 trip to Las Vegas in which Pergande placed a futures futures wager at 50/1. He explained the rest of the story to Legal Sports Report:
They went 7-1 to start the season and the odds dropped to 15/1. I called my now business partner (Ian Epstein) who worked for CG Technology at the time, and asked where can I sell this ticket in Vegas. He said nowhere. It seemed like a gap in the market so we set out trying to solve it.
PropSwap opened for business less than two years later in August 2015.
How it works
The functionality has grown over the past two years, and more streamlining is on deck, according to the founders. Here’s how it currently works:
- A bettor in Nevada places a bet in a brick-and-mortar sportsbook.
- The seller uploads a photo of the betting slip to PropSwap’s client, enters the details, and sets the sale price.
- PropSwap verifies the validity of the ticket and lists it on the marketplace.
- A buyer purchases the slip with a credit or debit card.
- The seller mails the slip to PropSwap.
- PropSwap delivers the slip to the buyer via certified mail.
- The buyer redeems the slip with the sportsbook, either in person or via mail.
In order to insure the transaction, PropSwap requires credit card information from the seller. It takes a 10 percent commission from the final price, so there’s no up-front fee for either party.
PropSwap touts this process with a number of testimonials on its site, like this one:
WIN! – Steve from San Francisco sold his GSW Futures for $8,000 (collect of $10,500) when they were up 3-1 against the Cleveland Cavaliers. Greg then flew to the Bahamas that day and let the rest of us watch Curry & Co. collapse. True story.
Expanding to more states
For the first two years of its operation, PropSwap was a Nevada-only product.
On September 1, the concept is rolling out to four more states:
- New Jersey
While all four states have gambling establishments within their borders, single-game wagering is still illegal in all of them. New Jersey has passed a law to legalize sports betting, but that effort is pending an appeal in the US Supreme Court. Connecticut just passed legislation to regulate it last month, and it’s encouraging to see regulators from the other states willing to let PropSwap operate, too. And it makes sense from a legal standpoint.
Since buyers are receiving physical tickets, they’re not betting on sports, by definition. The ticket is simple property, and it falls under the same laws as any other piece of paper. This piece of paper, though, may or may not have significant value depending on the outcome of the bet that was placed back in Nevada.
PropSwap’s founders met with regulators in each state to review the legal landscape prior to making the move.
Operating within regulators’ recommendations
Because it is not a gaming entity, PropSwap is not regulated by the Nevada Gaming Commission. Still, it takes due care as it operates around the perimeter of gaming.
When it was only serving the Nevada sports betting market, PropSwap facilitated the actual payout of the ticket itself. While that is still technically legal, the NGC advised that it would prefer to see that changed. So it was. The buyer is now fully responsible for redeeming the tickets, either in person or through a mail exchange with the sportsbook.
By treading carefully, PropSwap seems to be making progress. When it launched, sellers had to conduct transactions in person at a terminal inside a sports bar in Las Vegas. The seller also had to provide the physical ticket before the marketplace would list it.
With the expansion, the process now operates electronically and in real time. The seller’s credit card is pre-authorized when a ticket sells, guaranteeing the transaction and expediting the exchange. Sellers have seven days to submit the ticket to PropSwap if it sells.
The real-time functionality has an additional benefit that the company thinks will be key to its growth. In addition to futures slips, bettors can now list tickets for straight bets, and buyers have the ability to make purchases both prior to and during the game.
It’s tough to find sellers
Talking bettors into giving up their tickets is one of PropSwap’s biggest obstacles. Many gamblers would rather let a bad bet ride than take a buyout up front. Pergande and co-founder Ian Epstein elaborated on the issue:
Convincing bettors to sell their ticket has been a much larger challenge than we had initially thought. They see the ‘Collect’ amount on their ticket, and won’t accept anything less than that. The psychology theory behind it is called ‘Loss Aversion’. People don’t want to be the guy who sold their ticket too early.
PropSwap’s expansion to the northeast could be a boon for potential sellers, though. Whereas they were previously limited to the prices fellow-Nevadans were willing to pay, the market is now open to thirsty would-be sports bettors from states in which options are limited. There should be a significant increase in the margins at which sellers are able to shed their tickets.
Gearing up for even more?
The prospect for out-of-state expansion led the company to broadcast a $6 million valuation in 2016. This year, it appears to be gearing for a big push to help drive its growth.
PropSwap has reached out to potential investors, LSR has learned, trying to raise up to $500,000 under that valuation. It refers to the fundraising as ‘building a moat’ in preparation for the competition it expects to enter its neighborhood.
“As we grow,” Pergande said, “the plan is for all visitors that come to Las Vegas to make bets with PropSwap in mind, knowing it doesn’t need to win in order to make a profit, it just needs to improve.”
Like any good letter to investors, this one contained a coyly worded caution in its close, too. If the expansion goes as planned, PropSwap says it may feel justified in increasing its valuation.