The decision, which came Thursday (10 April) afternoon, was made out of company funds as a goodwill gesture, even though PropSwap says it had no legal obligation to do so.

The incident began when a Caesars Sportsbook customer sold a futures parlay bet through PropSwap that ultimately cashed.

The customer was expecting a payout of $37,000. However, due to federal and state tax withholding rules, the net amount should have been closer to $25,700.

The discrepancy sparked outrage among sports betting enthusiasts online, many of whom accused the platform of misleading users.

According to PropSwap co-founder and CEO Luke Pergande, the seller had undergone a rigorous onboarding process and was explicitly informed, both through a recorded 20-minute video and multiple emails, that bets listed for sale must reflect post-tax value.

“We told him that he needs to post this bet for net tax,” Pergande told NEXT.io. “Which, net tax was $25,700. And we didn’t catch it. It slipped through the cracks.”

In response, PropSwap is implementing a new layer of internal review. Every mobile ticket listed for sale will now be manually checked by staff before being approved. “We’re not as big as eBay is yet,” he said. “So, we can delegate an employee to do this.”

Why PropSwap says it doesn’t guarantee bets

The controversy raised broader questions about whether PropSwap guarantees bets listed on its platform, a concern Pergande addressed.

“In my opinion, and many lawyers’ opinions, if you’re guaranteeing sports bets, you’re a sportsbook. And the state of Illinois, that’s $20m, subject to massive tax rates.”

He argued the second reason PropSwap doesn’t guarantee slips is due to financial feasibility, highlighting the business charges 10% to sellers and 3% to buyers.

“StubHub charges 35% buyer fees and 15% seller fees. StubHub is worth $7bn so we are not there yet. StubHub does guarantee tickets, but again, also way different business model, like these bets can pay out $1.7m. Tickets on StubHub are not selling for $1.7m.”

PropSwap operates on a peer-to-peer model. Sellers list bets they’ve already placed, and buyers can purchase them at negotiated prices.

If the bet wins, the original bettor is expected to pay the buyer the full amount. While this introduces an element of trust, Pergande claims their fraud rate is just 0.002%.

Did PropSwap try to crowdfund the user’s bet?

The social media firestorm was further inflamed by what some interpreted as a crowdfunding attempt, after PropSwap offered a promotion covering part of a new user’s first bet.

Pergande said that this wasn’t an effort to crowdsource the original payout.

“The spirit of that was, let’s get everybody who’s criticising who’s never used the product, let’s see you try it, and then you can have your criticism.

“Obviously, it didn’t land. Well, Twitter had the pitchforks up already, but yeah, that was, that was the logic behind doing some of that. In no way, shape or form was this a crowdfunding exercise.”

Despite the blowback, Pergande remains confident in the platform’s mission and future.

“We’ve been running this business for 10 years. We’ve had 300 plus articles of positive press. This is kind of our first negative story. It’s our opinion that a lot of people have been happy for the years. But it takes just one bad situation. So, we’re working on it, and, we think we can solve this moving forward.”