The Global Sports Financial Exchange trades pro-sports teams like stocks

Key Points
  • Mixing money and sports is typically muddy water — until now, according to entrepreneur and actor Zack Ward and ex-NHL player Bernie Nicholls.
  • They've teamed up to push a platform that allows fans to invest in pro teams.
  • The Global Sports Financial Exchange is being billed as the world's first sports stock market.
Investing in sports with the world's first stock exchange

Thanks to two entrepreneurs, fans now have a new way to invest time and money in their favorite teams.

Actor Zack Ward and ex-hockey pro Bernie Nicholls have teamed up to push a platform that allows fans to invest in pro teams. Named the Global Sports Financial Exchange (GSFE), the endeavor is being billed as the world's first sports stock market.

However, it's not betting, according to Nicholls and Ward — also known for playing bully Scut Farkus in the classic 1983 movie, "A Christmas Story." Nicholls, using his hockey connections, took a meeting with NHL Commissioner Gary Bettman and Deputy Commissioner Bill Daly to shop the idea.

"I remember the first thing Mr. Bettman saying to me was, 'It's not gambling is it?' I said, 'No Gary, it's not gambling,'" Nicholls recalled in a CNBC "Squawk Box" interview last week.

According to the proprietors, the exchange operates on a similar principle that drives stock market investments. "If you buy shares tonight in the Rangers and they play and lose, you don't lose your investment," said Nicholls, a former New York Rangers and Los Angeles Kings center who now serves as a spokesperson for the exchange.

"You get paid dividends on every win. So if your team does well, you do well," he added.

Zack Ward
Paul A. Hebert | Invision | AP

The sports exchange, a subsidiary of AllSportsMarket, operates much like any public stock market. But instead of companies, the roughly 6,000 investors on the platform buy shares of teams in the NHL, NFL, MLB, and NBA.

"You decide, like the New York Stock Exchange does, what you're willing to pay for that share and what you're willing to sell it for," said Ward, the Global Sports Financial Exchange's CEO. "It pays dividends at every single quarter, so you can make very good money at it."

The GSFE is based on the "exact same structure that was used when the New York Stock Exchange first opened in 1817," the 48-year-old Ward told "Squawk Box".

After each game, the winning team's shareholders get a dividend, and the losing team's share price likely goes down. Team stock prices fluctuate based on a range of criteria such as performance, draft picks, and trades.

The Carolina Panthers, for example, were trading around $6.72 per share, and gained a quarter of a percent after beating the Vikings last Sunday.

You decide, like the New York Stock Exchange does, what you're willing to pay for that share and what you're willing to sell it for.
Zack Ward
Global Sports Financial Exchange CEO

The exchange is currently seeking the thumbs up from various league commissioners and professional teams. Meanwhile, there are two ways to trade on the platform.

The learning version allows users to invest imaginary money to test out the platform. The "real money" version, which launched in 2016, allows users to invest up to $2,500 of actual currency per year.

'Free money'

Ottawa Senators center Derick Brassard (19) recovers the puck following a shot on New York Rangers goalie Henrik Lundqvist (30) in the second period at Canadian Tire Centre.
Marc DesRosiers | USA TODAY Sports | Reuters

The company is aiming to make it an open market and get Securities and Exchange Commission regulation within a year, Ward said. Until then, the exchange is being operated as a nonprofit. However, the exchange has some precedent: In November, AllSportsMarket said its "free learning and pilot markets" topped $1 billion in market value.

Unlike bets, the exchange's investments don't expire, Nicholls explained. This approach helps sports fans avoid the crisis of "going to meet your bookie on a Tuesday morning with an envelope full of hundred dollar bills," he said.

The real appeal to leagues though, Nicholls argued, is financial because the exchange is offering each league half of each transaction made in their sport.

"If you buy shares in the Rangers, I buy shares in the Devils, 50 percent of every transaction made goes to the league," said Nicholls. "It's free money. I can't see them not taking it."

This long-term investment model could engage fans in a way that's impossible in fantasy sports, and could sweeten the deal for commissioners who see fantasy sports as betting, he added.

"It's not like fantasy where you have to build a team, you may not get your own players on your team that night," Nicholls said. "Here you've got a vested interest, every true fan wants to feel like they own a little piece of their team."

Bernie Nicholls skates at the Hockey Hall of Fame Legends Game November 8, 2009 in Toronto.
Getty Images

So if a loyal fan of a perpetually losing team trades on the GSFE, they can use the platform to hedge their investment with some winners. Teams making trades, or underperformers who get a first round draft pick, could be a good long-term investment to hold for one to two years, Nicholls offered.

In addition to making money, executives at the sports exchange are hoping to help promote financial literacy among young sports fans. While kids might not be enthusiastic about a company stock price, their favorite sports teams could help pique interest in financial markets.

"If you turned to your son or daughter who's 8 years old and said, 'Let's talk about market fluctuations and dividends,' those kids are going to go into a coma," Ward said. "That child through osmosis is going to grasp the basic understanding of investing."

One company investor and user of the platform said he makes about $2,000 every weekend through the sports exchange. "This weekend, with basketball combined, it was a little over $3,000," said Chad Deihl, a real estate agent based in Fresno California.

"I look for the teams that I know are successful and any money that I earn, I don't take it out, I reinvest it in more stock," explained Deihl, who said he has made $112,987 since the real money version of the site launched in 2016. As an investor in the company, he gets a "bonus margin" that helped him hit six figures.

"I'm pretty well-diversified across the four main sports," Deihl said.