LAS VEGAS — In the cutthroat, savage business of sports wagering, what Chicago natives Ian Epstein and Luke Pergande recently delivered with their secondary-market PropSwap company might qualify as celestial.
Call them the Patron Saints of Sports Betting, for leading a charge two weeks ago, when the global coronavirus pandemic quashed the NCAA Tournament, that produced a complete refund to customers who had bought such futures tickets.
“That’s why it was so shocking to people,” Epstein said. “It just seems like everyone is out to get everyone — the books are out to get the gamblers, by limiting [betting amounts] or cutting people off, or offering juiced-up lines, and gamblers are out to expose the books whenever they make a mistake.
“Everything is so binary. Either ‘I love it’ or ‘I hate it,’ it’s great or it’s terrible. It doesn’t have to be that way. You don’t have to be blood-sucking or Mother Teresa. People can make money and still be charitable.”
PropSwap, founded by the pair in 2015, had been rolling in good fortune. Individual investors in 2019 had enabled them to become full-time salaried employees in January 2020. In February 2020, PropSwap earned five times more than it did in February 2019. March Madness had been proven to be its golden goose.
Silicon Valley investors were lining up to engage with them.
Those dalliances, at the very least, have been delayed. The duo, however, thought only of the now, today, when the sports world screeched to a halt. They refunded their 10-percent commissions on sales of those NCAA futures tickets, some of which were bought months ago.
Next, they ventured to ask the sellers of those ducats to return some, or all, of their net gains. The Good Karma Plan was an overwhelming success. In fewer than 10 days, every penny had been returned to the buyers, a six-figure sum total.
It had been already publicly revealed when Pergande started penning a private message to investors. He had not finished the dispatch when he began receiving text messages, all gung-ho, from a third of them.
“They said, ‘Hey, we love this! Keep this up! We’re happy to be a part of this! Totally the correct move!’ It was amazing how much reassurance I got before I even communicated the plan to them. Everyone was supportive of this. Everyone is just so generous right now. Crazy.”
Chicago to Asia to Vegas
Crazy describes how two Chicago kids who attended high schools eight miles apart would first meet, in passing, on the University of Arizona campus in Tucson, befriend each other on the other side of the world in Macau and eventually become business partners.
(Or how, with 20 states and Washington having legalized sports betting, their home state is the only one that forbids their secondary-market livelihood; more on that later.)
Epstein, 30, and Pergande, 31, both graduated from high school in 2007, Epstein from Evanston, Pergande from Maine South.
Epstein did not play sports, but he advanced through Evanston’s media club to provide basketball and football play-by-play for its closed-circuit outlet.
Pergande played football and baseball, and wrestled. Charlie Sagan proved to be a degree of separation between the future entrepreneurs. Evanston’s mammoth left tackle, also Epstein’s close pal, tormented Maine South’s outside linebacker, Pergande.
A monster, Pergande calls Sagan. Spin moves, shivers, nothing worked for Pergande as Sagan rag-dolled him on every blitz attempt. In November, Epstein will be a groomsman at Sagan’s wedding.
“He remembered [Sagan] as his toughest opponent,” Epstein said of Pergande. “Then he finds out [Sagan] was my childhood best friend!”
Epstein and Pergande both matriculated to Arizona and its Eller College of Management business school. A weekend venture inside a Vegas sportsbook became an epiphany for Epstein; the action behind the counter, the numbers behind the numbers, the triggers to their fluctuations.
In a 2009 World Series game against the Yankees, he had selected a Phillies-under parlay in an offshore wager. Both angles were winning, but Epstein had an omen. He asked his three roommates, If a secondary market existed, could that ticket be sold right now for a profit? They all nodded.
The parlay lost. Epstein brainstormed a name for such a company and bought its domain name, BetBidz.com, that he still owns.
PropSwap’s first seed.
Pergande and Epstein both undertook internships in Asia the summer before their senior years. Pergande, with a finance emphasis, had been in Nanjing, on mainland China. Epstein, who focused on management, was in Hong Kong. His group organized a grand send-off party at The Venetian Macao, in Macau. Epstein invited Pergande, who delayed his flight home to sail across Jiaokeng Bay to attend.
Hed Kandi techno music blared over a large pool, bobbing with rubber ducks and beach balls. They had a cabana. Bikinis. Board shorts. Champagne. They frolicked, testing their sketchy French on female models until 4 a.m.
They got along well. They stayed in touch as they went separate ways, Pergande to the San Francisco Bay Area to peddle hedge funds for Bloomberg, Epstein home to Evanston. He would heed that sportsbook bug and return to Vegas, hooking on with Cantor Gaming (now CG Technology) to learn the nuances of the business in its backrooms.
Pergande visited for Labor Day weekend in 2013 and invested in New Orleans winning the next Super Bowl. Later, when those odds dipped, he inquired if there were an outlet to sell the ticket at a profit, the buyer getting better-than-current odds? Doesn’t exist, Epstein said.
He told Pergande of his BetBidz idea.
Eureka! Epstein’s pessimism complemented Pergande’s optimism. They hatched PropSwap LLC in September 2015, at a high round table in a suburban sports pub.
That, however, cuts to the chase too conveniently. In gaining approval for the company, they sifted through 15 fickle lawyers who did not want to parry with the state’s Gaming Control Board. Finally, they found Dan Reaser, of Fennemore Craig, who had the proper connections.
Ultimately, the GCB — having determined that this did not constitute gambling, that this was about sports-betting tickets as property — blessed PropSwap in April 2015. That July, Pergande moved to Las Vegas.
In May 2018, the Supreme Court abolished the Professional and Amateur Sports Protection Act of 1992 (PASPA), which forbade states from deciding their own legalized sports-betting fates. A few weeks later, to capitalize on the industry likely mushrooming across the country, Pergande moved to Atlantic City, New Jersey.
The intricate details are in “Sports Betting for Winners,” my sweeping October 2019 book that devotes an entire chapter to Epstein and Pergande. They advise certain Land of Lincoln officials to dig into those details.
On Jan. 26, Pergande learned that Illinois would bar the reselling of sports tickets when its legal sports-betting operations began on March 9. In subsequent meetings, he said, those politicos never specified why. He believes consumer demand, as it did with Uber and Airbnb, will make it happen. He said Rivers Casino, the most powerful industry constituent in the state, is “a huge fan” of PropSwap.
“Logic will prevail in Illinois,” Pergande said. “Consumers want this. It’s their right to sell their property. [The state] is literally regulating commerce, overstepping [its] boundaries . . . an unnecessary hurdle.”
Tickets and Trust
PropSwap’s two founders had invested every penny of their savings in the company. For longer than they care to admit, they relied on their 10-percent sales commissions to survive on peanut butter and jelly sandwiches, hoping to cover next month’s rent.
A snowball, Epstein calls it, started with the startling triumphs of the NHL-expansion Vegas Golden Knights in 2017-18. As they soared, initial high odds of them winning it all decreased, and sellers of those tickets made money along the way.
Radio personalities Clay Travis and Cousin Sal invested $57,500 in a ticket, to win more than $110,000, on the Saints. Then came the Texas Tech basketball ticket, $1,500 at 200-1 odds; Cowboys receiver Dez Bryant’s $50,000 offer got rejected.
In January 2019, St. Louis fan Scott Berry spent $400 on a 250-1 ticket on his Blues winning it all. As they proceeded to win it all, he made headlines and ESPN ‘‘SportsCenter’’ blurbs — as those aforementioned tickets did — on enticing PropSwap offers he had declined. He netted $100,000.
It all rolled into a bountiful football season this past fall. Said Epstein, “Momentum on top of momentum on top of momentum.” He and Pergande went on salary. Those Silicon Valley investors rang.
This NCAA Tournament, they projected, would set revenue records. Epstein had arranged a bash at The D in downtown Las Vegas, Pergande would attend ESPN Chicago festivities.
Then the March Madness music died. On March 11, Jazz center Rudy Gobert announced he had contracted the coronavirus. The NBA suspended its season, other leagues quickly followed suit, and the NCAA Tournament was canceled.
Epstein and Pergande reviewed contract details with their lawyer. The PropSwap terms and conditions are clear, that this is an exchange between a buyer and a seller for property. All sales are final, no refunds in the event of a cancellation.
“People are aware that this is a marketplace,” Epstein said, “that when you buy something on PropSwap you’re not buying it from the company, you are buying a piece of paper, a ticket, from another individual. We are not a sportsbook. We are eBay for sports bets. You buy a ticket, you’re going to get that ticket and you are responsible for cashing it.”
Still, when they deliberated the night of March 11 into March 12, Epstein and Pergande were bothered. As the pandemic’s reach became clearer, they had misgivings about their commissions.
When buyers give them money, those speculators trust that they’ll receive a ticket. When sellers send them their tickets, they trust that the company will send them money. Their brand and reputations were based on trust.
“To risk that . . .” Epstein said without answering. They decided to return their commissions to buyers, then took an unprecedented tack in asking sellers to give back some of their profits, if not all, to those buyers in the name of integrity and their unique industry niche.
Sports betting has a heart and soul?
“If people perceive that this company’s just trying to grab as much money as possible, not looking out for their customers,” Epstein said, “thinking that you’re screwing them, which wasn’t the case, . . . if that’s the perception, then that becomes the reality.
“This situation just kept getting more and more unfortunate. It was clear that this is not just about sports, that [the pandemic] would affect people’s everyday lives. It was clear casinos were shutting down. How can we try to bridge that gap even more, without making any promises?”
They straddled a tightrope. Do nothing, resemble vultures. If they put the altruistic request out publicly, with no response, the look would be embarrassing. “Egg on our face,” Epstein said. “Definitely a risk to call on our sellers, gamblers, to voluntarily give back money out of their pockets.”
The response overwhelmed Epstein and Pergande. If some returns were not 100 percent, they covered the difference in
future commissions, on-site credits or with their own cash. By March 21, every buyer had been made whole, well into six figures, Epstein said. One wrote on Twitter that he had received almost all of his investment of $2,000. You, he typed to the pair, have a longtime promoter and customer.
“Shocking,” Pergande said. “I’m close with a lot of our customers, so I had a feeling that some of them would help. It was very clear to everyone that this was optional, so it was cool to see those PayPal [accounts] rolling in, for thousands of dollars.
“It just seemed like the right thing to do, with people losing their jobs, losing loved ones to this disease. A small check from us, in the grand scheme, made sense.”
