The first peer-to-peer legal sports betting exchange in the United States is closing its doors.
In an X (formerly Twitter) thread on Monday, Prophet Exchange announced it was shutting down its trading platform. While specifics weren't offered, the company cited "the regulated environment" as a key factor behind the decision.
The company also stated it plans to launch a product that will be "more widely available to the masses" sometime in the future.
Prophet Exchange launched in New Jersey in August 2022. Former New York Giants wideout Victor Cruz placed the inaugural bet and the platform notably handled over $1 million in peer-to-peer Super Bowl LVII bets.
The startup landed over $10 million in funding in April 2023, with co-founder Dean Sisun stating at the time that the company's mission was “to dominate the straight bet experience in the US.”
While sports betting exchanges are fairly common in Europe, they are a fledgling segment of the legal sports betting industry in the U.S. Alongside Sporttrade, Prophet Exchange was only one of two such exchanges in New Jersey, the sole state where it operated.
Shots fired
Prophet Exchange doesn’t have an extensive online presence, especially compared to the big players in the sports betting world. But when the brand made noise, it didn't mince words with how it hoped to differentiate itself from the best sportsbooks in the U.S.
In its thread announcing the closure, Prophet Exchange fired shots at the current state of affairs in the legal sports betting industry that’s dominated by the likes of FanDuel and DraftKings, claiming the market is anti-consumer:
BUT, the regulated environment, which is essentially written by and for sportsbooks, is NOT conducive to a pro-consumer betting platform.
— ProphetX (@Prophet___X) June 24, 2024
The regulated environment wants users to lose, and will either ban or limit users who win consistently.
Unlike a traditional sportsbook, Prophet Exchange claimed to only make money when bettors won; not by charging a large commission on every bet that favors the house. Prophet instead looked to provide a platform where bettors could compete directly with one another, and one in which losses didn’t mean victory for the platform.
What’s next
While Prophet Exchange says it plans to return with “a brand new product that will be more widely available to the masses," it may have difficulty doing so.
The U.K., for instance, has roughly half a dozen sports betting exchanges, while New Jersey is currently the only state where the exchange model is legal.
A handful of other states have bills in the pipeline to change that but for now, limited market access puts a cap on any potential growth.
Even with volume and multiple markets, the economics of the exchange model are tough too. In general, exchanges don’t have as many fees since they take less of a cut compared to retail sportsbooks and online sports betting sites. However, liquidity can be an issue in this framework since it’s all about getting customers to bet the other side of a play.
Since exchanges don’t have much notoriety in the U.S. yet, finding a willing taker to bet the other side of a more, let’s say, exotic wager - like a CarJitsu match - might be difficult.
Maybe the Prophet guys will figure it out though. They encouraged their X followers to stay tuned...
