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The Nevada Gaming Control Board (NGCB) has declined to move forward with proposed regulatory changes to allow for the registration of companies offering the resale of pending sports bets.
The control board’s decision on Thursday (May 23) closes the door for now on PropSwap’s efforts to update state gaming regulations to allow the company to re-enter the Nevada sports-betting market.
“I still don’t think this regulation needs to be in Nevada,” said NGCB chairman Kirk Hendrick. “I am not in a position of moving forward with this recommendation to the [Nevada Gaming Commission] but I say that also with the caveat that this is a good draft of what could happen.”
“I would say that in the future this may be looked at again but where I sit today, I am just not in favor of recommending it to the commission,” Hendrick added.
Commissioners Brittnie Watkins and George Assad were also in support of denying a recommendation to send the amendments to the five-member commission for final consideration.
PropSwap, which was founded in 2015 in Las Vegas, operates as a secondary market enabling gamblers to buy and sell active paper betting slips to other bettors, whether that is before or during an event, on the condition that the outcome has not been settled yet. The company takes 10 percent of the sale price as a broker.
“We are disappointed by today’s decision,” PropSwap said in a statement emailed to Vixio GamblingCompliance. “For over two years, PropSwap has sought approval from the board, as a way to legitimize this industry we created nine years ago and bring protection for consumers.”
Former NGCB chair Brin Gibson’s decision in 2021 to categorize PropSwap’s business illegal in the state led to a drawn-out legal battle and a failed legislative effort last year to legalize a secondary market for sports-betting tickets in Nevada.
The changes considered Thursday by the control board were based on a settlement agreement reached between the NGCB and PropSwap, which withdrew an appeal made to the Nevada Supreme Court in return for the board’s consideration of its proposed regulatory changes.
“During the six years in which PropSwap did operate in Nevada, thousands of customers were able to find willing buyers for their tickets, which then resulted in those sale proceeds being spent within the local gaming economy. During that same time, zero customer complaints or issues were raised to the board.
“While we disagree with Chairman Hendrick’s decision today, we appreciate his time and consideration on the matter,” the company said.
PropSwap proposed to add the category of “betting ticket resale service provider” to the state’s regulations overseeing the operation of a gaming establishment, including service providers.
According to the draft amendments to NGC Regulation 5.240 dated May 8, 2024, PropSwap or another other operator would need to register with the control board and could offer a secondary marketplace through an agreement with a licensed sportsbook.
In addition to PropSwap, the likes of WagerWire, SecondBet and BetSwap also allow gamblers to buy and sell previously placed sports bets or fantasy entries. PropSwap does not have a gaming license to operate in Nevada.
PropSwap’s amendments would have prohibited out-of-state transactions, as well as prohibiting payments based on a percentage of revenue. Companies would also be required to prevent money laundering, fraud and other criminal activities, and comply with all state and federal laws.
According to the proposed amendments, registered providers would also be required to prohibit people who have been excluded or ejected from the state’s casinos from purchasing a ticket on the secondary market.
Marc Rubinstein, a partner with Reid, Rubinstein & Bogatz who represented PropSwap, reminded the control board that the company was not seeking to change the definition of a wager but simply adding the ability to register as a provider.
“We don’t believe it opens any regulatory gaps,” Rubenstein said. “We believe ... that it is better to have this activity regulated.”
Without regulations, Rubenstein said, the door is open for illicit operators to continue to trade in pending sports wagers.
“So, we do think this is something that’s a plus for the state,” he added.
PropSwap appeared before the NGCB at a public workshop on March 7, when the company detailed the benefits of the proposed regulatory amendments. The company currently operates in 38 states.
During last month’s hearing, the NGCB had numerous questions for Rubenstein and PropSwap executives, with most of them revolving around whether the reselling of sports-betting tickets is a second wager and subject to gaming taxation.
Rubenstein did not believe the sale was a second wager, and what was taxable was the commission PropSwap earned from each sale. On Thursday, he reiterated his position that PropSwap had no objection to a gross gaming receipts tax on the commissions it charges.
Hendrick admitted that regulators were still trying to figure out if this was something the Nevada gaming industry and customers needed or wanted.
PropSwap has compared itself to StubHub, which offers a secondary market for concert and sporting event tickets.
“If this was possible, why wouldn’t Nevada licensees do it themselves?” Hendrick asked. “I haven’t had any Nevada licensees come and say we will do that. What you are hearing in Nevada and other jurisdictions is early cash-out, which is not your mousetrap but it is a similar mousetrap.”
Hendrick made it clear that early cash-out of wagering tickets was going to be a much bigger consideration as the sports-betting industry continues to grow.
He also expressed concern that as customers continue to move from paper tickets to mobile wagering it may eventually require PropSwap to be licensed if the company's offering was included in a licensed sportsbook’s mobile app.
