ProphetX launches revamped exchange platform in 39 states

Earlier this week, ProphetX - formerly known as Prophet Exchange - launched its revamped exchange product in 39 states, significantly widening the reach of the platform.

Originally launched in 2022, Prophet Exchange holds claim to being the first regulated and licensed betting exchange in the US market.

Co-founders Dean Sisun and Jake Benzaquen joined Ep. 34 of the Betting Startups Podcast in August 2022 ahead of the platform’s debut in New Jersey, and beamed with optimism about the disruptive potential of exchanges in the US market (listen to Ep. 34 on Apple Podcasts or Spotify).

However, in the two years since that original NJ launch, Prophet Exchange has been unable to expand to other states, which understandably has impeded the platform’s growth potential.

As Benzaquen explained in a recent interview with BettingStartups.com at the SBC Americas conference in May 2024, getting state regulators to approve the exchange model proved challenging.

“It's tough for us to go in and try and convince regulators to allow and put in specific product test requirements for a product like an exchange when they're trying to deal with just wrapping their arms around a sportsbook and how to best monetize the traditional model. So the education is not only on the consumer side, but on the regulator side.”

Despite the regulatory headwinds, Benzaquen hinted in that same interview that expansion was indeed on the horizon.

“We’re looking at launching many more states later this year. So hopefully that regulatory environment can be put to bed a little bit towards the latter half of the year.”

A mere week after that interview at SBC, it was announced that Prophet Exchange would be ceasing operations in New Jersey at the end of May.

But that announcement also came with reassurance that it would eventually relaunch, though at that time details were scarce as to what that meant - or when it would relaunch.

Fast forward to this week, and those questions have now been answered: Prophet Exchange has undergone a modest rebrand to ProphetX, and a major restructuring of its model that now gives it access to 38 more states than it previously had.

ProphetX has embraced the sweepstakes model to bring its exchange wagering platform to a vastly larger audience.

It joins existing sweeps sportsbooks like Fliff and Rebet, along with fellow exchange Novig that also just announced a pivot to the sweeps model.

With the launch of ProphetX just before the start of the new NFL season, we caught up once again with co-founder Jake Benzaquen to get insight into the lead-up to this week’s announcement.

What was the driver behind shifting to a sweepstakes model after operating as a licensed operator in NJ?

The decision to shift to a sweepstakes model was two-fold.

First, it was the lack of states that regulated exchanges and the unit economics of operating in the regulated market. New Jersey (and Colorado extremely recently) are the only states to even allow exchanges to operate. We spoke with a myriad of other states, where exchange regulation was written into the law, who told us they need at least 18 months (!) to figure out exchanges as they are focused on sportsbooks and iCasino. The regulated environment for exchanges is moving too slow.

The second aspect was the extremely high costs of operating. It is unsustainable to be an exchange, or sportsbook, or any type of regulated operator in just one, two, five, even 10 states. Market access fees, state taxes, regulatory costs, federal excise tax and more contribute to profitability being almost impossible unless operating at scale, which as alluded to is not possible as an exchange.

We are a true exchange and peer-to-peer ecosystem that cannot operate as a sportsbook, and therefore, felt we had no choice but to leave the regulated market until regulations mature.

When was it clear that a shift in strategy was required?

In January 2024 we decided to pursue sweepstakes more in-depth. After talking to states that had exchange regulations written into the law, but refused to regulate us, we knew there was no path forward in the regulated market. We could not achieve scale, nor profitability.

Explain how the sweepstakes model works with an exchange product?

Sweepstakes allows user to play for free, using our virtual currency Prophet Points.

Prophet Points can be claimed for free every hour, or they can be purchased. When purchasing these Prophet Points, which again have no monetary value nor can be redeemed for any prizes, users can also be given Prophet Cash, another virtual currency that can be redeemed for prizes, such as USD. If a user wins enough Prophet Cash within our sweepstakes, it can be redeemed for a real money prize.

The above is true of any sweepstakes model, however, all sweepstakes operators are casinos or sportsbooks. These are player versus house markets, and what has led to a bad reputation of sweepstakes - because of this adversarial relationship, sportsbooks and casinos have in many instances screwed over the player.

As an exchange, there is no house, and therefore zero incentive to screw over any player. We will be bringing the same core exchange experience we had in New Jersey over to sweepstakes, and will continue to treat every player fairly and be a pro-consumer advocate in the space.

How will the customer experience be similar/different to the previous exchange product in NJ?

The exchange itself will be the same core product we previously offered, you are just able to play on the exchange in either Prophet Points, a free-to-play currency, or Prophet Cash, which can be redeemed for prizes such as USD. Users can still request their own odds, will never be limited, make markets and more!

ProphetX is now available in 39 states. Download the app in the Apple app store and on Google Play.