A public payout dispute on PropSwap, a secondary marketplace for sports betting tickets, is raising questions about consumer protections as the platform expands under new regulatory oversight.
The incident comes just weeks after PropSwap announced a retail Mississippi sports betting partnership with Bally Bet, placing the exchange under the jurisdiction of a state regulator for the first time. The arrangement allows bettors at Hard Rock Hotel & Casino Biloxi and Bally’s Vicksburg to resell active betting slips through PropSwap’s exchange.
Neither Bally’s nor the Mississippi Gaming Commission responded to requests for comment.
Unpaid Eagles Super Bowl bet
The user at the center of the dispute, known on X (formerly Twitter) as @thecat123454, purchased a $5,400 Super Bowl futures ticket on the Philadelphia Eagles in December. The ticket was listed on PropSwap at +509 odds to pay out $38,292. But after the Eagles’ February victory, the user received only $25,711, over $12,000 short of the listed ticket.
PropSwap says the seller incorrectly listed the bet using its pre-tax value, despite the exchange’s rules. Because the bet’s odds exceeded 300-to-1, federal tax withholding laws triggered a mandatory reduction in the payout. According to PropSwap, the seller forwarded the full amount they received from Caesars, which was $25,711.
“Per our terms and conditions, whatever you punch in the bet as, you owe us that amount of money,” PropSwap CEO and co-founder Luke Pergande said in an exclusive call with LSR. “This is not DraftKings or FanDuel; this is a secondary market, just like eBay. We are connecting two parties, and we’re charging a fee when a sale is completed.”
The incident did not involve either of the Bally’s casinos in Mississippi.
Listing included pre-tax payout
Unlike regulated sportsbooks that guarantee winnings and are subject to tax, licensing, and compliance obligations, PropSwap functions as an intermediary. Users list active sportsbook tickets for sale, and PropSwap facilitates the transaction. If the bet wins, the seller is contractually required to send the proceeds to PropSwap, which then pays the buyer.
Pergande said the company has long made its expectations clear to mobile sellers through identity verification, a 20-minute video onboarding call, and multiple written reminders — especially concerning bets that meet the federal 300-to-1 rule, which withholds 24% of payouts on tickets with odds over 300-to-1.
“We remind them many times over written emails, and then also during the onboarding that you must post your bets at net taxes,” Pergande said. “We’ve delegated an employee’s role to review every single ticket posted on PropSwap to make sure that’s caught before it gets sold.”
Sign-up offer sparks controversy
The controversy intensified after PropSwap initially paid $6,000 and tied the remaining amount to a public promotion now deleted on Twitter. The company said it would cover the full payout if 1,200 new users signed up within 24 hours.
The buyer accepted the arrangement and withdrew the $6,000 the same day, according to Pergande, who said PropSwap is continuing to pursue the full amount from the original seller.
The strategy drew swift backlash from gambling Twitter, where many users accused PropSwap of turning a failed payout into a promotional stunt. Pergande said the buyer agreed to the plan in advance, but he acknowledged the optics were damaging.
“It was a silly promotion. We regret it,” he said, adding that the promotion was in no way meant to cover a balance they could not cover. “This was in no way a crowdsourcing to get the $12,000. This was not, ‘Hey guys, why don’t you put in money so we can help get the [customer] his money back?’ No. It was, ‘Let’s have you try the service and then see if you still don’t like it after you’ve been critiquing it.’”
Drawback to guaranteeing bets?
Pergande defended the company’s broader track record, saying that less than 0.0002% of transactions in the past year have resulted in payout issues. He also pointed to PropSwap’s seller rating system, which shows the number of completed transactions for each user. In this case, the seller had zero prior sales.
“The goal is to eventually allow bettors to transfer tickets directly from a sportsbook app to PropSwap,” he said. “That would prevent these kinds of misunderstandings because PropSwap would be holding the funds and guaranteeing the payout.”
But offering that kind of guarantee also raises potential regulatory concerns. Providing guarantees may trigger the same compliance requirements faced by licensed operators, including capital thresholds and tax obligations.
“You got to pull out the insurance policy,” Pergande said. “That’s question number one. Then question number two, is regulatory-wise, I still think, if you guarantee sports bets, you’re a sportsbook and in the state of Illinois, that’s $20 million [in taxes].
“Hopefully we get to the point where we can guarantee everything, and we raise $200 million, but just — it’s not feasible at this point,” he said.
