The Nevada Gaming Control Board Thursday shot down the idea of a sports-bet resale exchange more than two years after regulators forced PropSwap to cease operating in the state.
The Las Vegas-based company sought the new regulations after losing a lawsuit in state district court and the subsequent diversion of its appeal to the Nevada Supreme Court. PropSwap’s proposed regulations were based on a settlement agreement between the Board and the operator, but after agreeing to give “fair consideration” to the changes, the Board slammed the door on that possibility.
Under the proposal, PropSwap, which operates in more than 20 other states, would have facilitated the sale of sports-wagering tickets by bettors who wanted to cash out early and take guaranteed money. For example, someone holding a longshot futures bet on a Super Bowl winner that made it to the final game might sell the ticket before the game.
In 2015, PropSwap discussed its business model with the Board for an online marketplace through which people could sell sports bets issued by Nevada sportsbooks. Without a Board decision on its legality, the company later started offering its services, said Nevada Senior Deputy Attorney General John Michela. The Board didn’t make a decision until August 2021. Regulators sent a letter to company executives informing them it wasn’t lawful in Nevada.
ProSwap ceased operations at that time and initiated litigation for legalization. After the district court denied the company’s request in February 2022, it was appealed to the Nevada Supreme Court, where it was diverted into the court’s settlement program and concluded at Thursday’s hearing.
The issue isn’t over. PropSwap advocated for a bill in the Nevada Legislature to legalize the service, but it failed to advance. It could return in 2025.
The Board determined PropSwap’s business model was illegal, because PropSwap doesn’t have a gaming license permitting it to facilitate wagering activity, Michela said. The proposed regulations would have solved that problem through the creation of a new category of service providers in which it would offer a secondary marketplace for sports tickets on behalf of licensed sportsbooks.
PropSwap’s attorney Marc Rubinstein said adding the ability to register ticket-resale providers and tying them to a licensee “is a tidy and simple regulation” that doesn’t open any regulatory gaps. It’s better to have it regulated than allow illicit operators to engage in this activity.
PropSwap is willing to pay a gross gaming revenue tax on its receipts, namely the commissions charged by the licensee, Rubinstein said. Many states have viewed the service as outside of their jurisdictions and not a gaming transaction.
“I’m a big believer in new concepts and entrepreneurship and you guys have found a new mousetrap,” said Board Chairman Kirk Hendrick. “I still have a number of concerns about this activity in Nevada. Is this something the Nevada gaming industry needs and customers in Nevada need and want?”
The Board previously raised questions about whether reselling bet tickets is subject to gaming taxation. There were also concerns about money-laundering and know-your-customer oversight.
“If this was possible, why wouldn’t Nevada licensees do it themselves,” Hendrick said. “I haven’t had a licensee come and say, ‘We’ll do that.’ This is early cash out, which isn’t your mousetrap, but a similar mousetrap. I think that’s going to be a bigger consideration as the sports-wagering industry explodes.”
Hendrick also pointed out that customers are going away from paper tickets and more toward mobile wagering and that raises further questions.
Board member Brittnie Watkins has ongoing questions about resale transactions and noted that there haven’t been any letters of support from the gaming industry.
Ian Epstein, co-founder of PropSwap, said there’s been no objection from the Nevada Resort Association. When the company was previously active in Nevada, it had partnerships with Circa Sports and others were willing to partner as long as PropSwaps was licensed.
“It wasn’t clear to me that the industry was in support of this,” Watkins responded.
Epstein said that if the Nevada Resort Association opposed it, it would have made its position known to the Board.
Rubinstein said that under any contract with casinos, ProSwap would include know-your-customer oversight. He added that the company doesn’t do transactions in cash and those concerns are lessened by bank transfers and credit cards, along with checks.
Board member George Assad said Rubinstein was persuasive and “you almost had me there,” but suggested operators get a brick-and-mortar location and obtain a full license. “And I don’t know how you verify the source of funds.”
Rubinstein countered they would do the same as casinos and praised PropSwap’s business practices.
“If you don’t adopt regulations, you’re pushing this stuff underground,” Rubinstein said. “If you really believe people won’t resell their tickets because we don’t have a regulation, that’s a fantasy.”
Hendrick said the Board doesn’t want to do that, but it’s not only about PropSwap. If the regulation were passed by the Nevada Gaming Commission, other entities that don’t have the history of PropSwap would arrive. “Licensees with race and sports books could do it themselves and I haven’t heard that,” Hendrick said.
Rubinstein countered that sportsbooks don’t have the resources. Since the Supreme Court struck down the federal ban on sports betting, there’s a lot of competition with expanded menus and mobile betting.
“Nevada has historically stayed out of business-judgment decisions,” Rubinstein said. “To me, this is a question of business judgment. If the casinos felt it would be in their best business interest, they would be doing it themselves. It’s been nine years since ProSwap first started doing this in Nevada. The technology isn’t complex. I truly believe at the end of the day, the analysis of the books is that the juice isn’t worth the squeeze.”
In closing, Hendrick said that the regulation doesn’t need to be in Nevada and hopes it doesn’t drive black-market activity because that’s not their intent. “This is a good draft of what could happen and I would say in the future it may be looked at again. But where I sit today, I’m not in favor of recommending it to the Commission.”
Watkins and Assad also have no interest in moving it forward to the Commission as well, but that the matter could return in the future.
