Alright, here's the method.
There's a lot more going on under the surface with this trick than it first appears, and it's really cleverly constructed. Originally, I thought it was a peek, that he looks at the 6S when he gestures to Alison. If he's using a memdeck, the rest is trivial. But then there's a lot of process afterwards that would seem unnecessary, it actually doesn't really look like he peeked the card, and when he spreads the deck at the beginning, it's not in the order of any of the standard memdeck stacks. So I thought he might be marking or crimping the 6S as an indicator, but that doesn't really work either if you follow it through to the rest of the trick.
It clicked when I watched again and saw the part where he spreads half the deck. That half of the deck IS in memorized deck order. It's the first 26 cards in Mnemonica, a popular memorized deck stack. So, the way the deck is set up at the beginning is that every other card is one of the first 26 cards in Mnemonica, and they're in reverse order. That way, when they're dealt out, those 26 cards are together and in order (as Amarsir noted, the cuts do nothing to change order, they just change where in the cycle you start). You can see this illustrated here, how the circle every other cards end up in order in the second picture:
So now all he has to do is look for the one card in those 26 cards (the order of which he has memorized) is out of place. It's out of place because Penn took his card first, but then replaced it first, thereby reversing the order of the two cards. The card which does not belong in the 26 is Penn's card. The card which should be there instead is Teller's.