Gambling Sweeps Across Another Industry. Welcome to the Future of Trading Cards. — Barrons.com

The Derek Jeter-founded Arena Club sees "a new era of collecting." Some see yet another instance of gambling taking over an American tradition.By Nick DevorGambling was once so verboten in Major League Baseball that retired New York Yankees icon Mickey Mantle was banished from the league in 1983 when he took a job with an Atlantic City casino that consisted of golfing with high-rollers. MLB's then-commissioner Bowie Kuhn said that "a casino is no place for a baseball hero and Hall of Famer" when he forced out Willie Mays for a similar offense.Four decades later, no one batted an eye when Yankee legend Derek Jeter was named an ambassador for BetMGM. His gambling connections don't stop with traditional betting. Shortly after his induction into the Baseball Hall of Fame, Jeter became the face of Arena Club, a start-up that digitizes the act of opening a pack of baseball cards-turning an age-old hobby into something that resembles an online casino.Arena Club sells virtual trading card packs that cost from $25 to $5,000. Each digital repack, as they're known, contains a single real-world card that could be worth far more-though likely much less-than the cost of the pack. Customers can choose across a variety of sports and games. The website highlights "grail" cards for baseball's Shohei Ohtani and Pokémon's Charizard.Upon opening the packs, lights and colors flash on-screen before the card and its estimated market value are revealed. The customer can immediately sell the card back for cash or get the physical card delivered."The thrill of the pull is magnified by the digital unboxing experience, where the anticipation of discovering a high-value card is instantaneous," Arena Club says on its website.Digital repacks have taken the trading card industry by storm. Collectibles giants Fanatics and GameStop have each launched their own digital repacks; dozens of smaller operators are hopping onto the trend, as well. In reporting this article, Barron's found 52 sites offering digital repacks. Web traffic and transactions on those sites have soared in recent months.Collector Crypt, a crypto-based site, has sold $1 billion worth of digital repacks since December 2024, according to user activity tracked on a blockchain. Rival site Courtyard.io told Barron's that it's on pace for $2 billion in annual sales. Mizuho estimates that Fanatics' collectibles business, which includes physical Topps trading cards, could reach $5 billion of revenue in 2026. Fanatics, which began as a sports apparel manufacturer, also operates a prediction market, sports book, and online casino.Arena Club says its product marks "a new era of collecting." Others see something different: another instance of gambling taking over an American tradition."The sites that I have seen are, in my opinion, offering illegal gambling," says Leon Y. Xiao, a researcher in Hong Kong who has advised governments around the world on gambling policy. "The user spends money for a random chance to get a card that can be easily converted into real-world money."At this summer's National Sports Collectors Convention in Chicago, the largest sports card show in the U.S., kids queued up at machines from Fanatics and Arena Club to swipe open virtual packs and win a random card. At the front of the line, lights flashed on-screen as a tween boy took his turn with Arena Club. A company host asked him, "Are you feeling lucky?" A Wayne Gretzky card appeared on the screen. "That's a nice hit!"Arena Club told Barron's that the "complimentary promotional giveaway" at the convention is separate from its digital repacks for sale online."Arena Club was built by collectors to modernize the trading card collecting experience while preserving what people have enjoyed about the hobby for generations," the company said in a statement. "We believe transparency, informed participation and responsible collecting are important to the future of the hobby, and we have designed Arena Club with those principles in mind."Representatives for Derek Jeter, who is listed as Arena Club's founding partner, didn't respond to requests for comment.Fanatics Collectibles told Barron's that any underage usage of its machines at the convention required parental consent. It has called its Instant Rips digital repack product "the future of collecting," and the company pushes back on any gambling comparisons."Instant Rips is not gambling," a spokesperson for Fanatics' collectibles business told Barron's: "It is a fun and engaging way to purchase trading cards and attempts to portray it as anything else is simply inaccurate. Collectors receive a card with every purchase. If a card is not right for their collection, they can exchange it for site credit and apply that credit towards another card they want."GameStop's digital repacks are made in partnership with leading card-grading firm Professional Sports Authenticator, or PSA. GameStop didn't respond to a request for comment; PSA declined to comment.Millions of digital repacks are opened each month. To maintain inventory, Collector Crypt CEO Tuomas Holmberg says his firm uses artificial intelligence to bid on cards listed on eBay, often by the thousands.The buying power of digital repack operators is partly responsible for the trading card market's resurgence from a postpandemic lull, according to Josh Luber, who co-founded Fanatics' collectibles business. An index of baseball card value maintained by Card Ladder currently sits at an all-time high."There's a lot of really good business that's come out of it, but how individual users engage with it-it's a crazy experience," Luber says of digital repacks.That experience has brought new attention from mental health experts who haven't traditionally tracked trading cards. Birches Health, a leading virtual treatment provider for gambling addiction, says it logged a 207% increase in patients talking about "trading cards," "digital repacks," and similar terms over the past 12 months.Says Luber, "Everyone's asking the question, 'Is regulation coming?' "If so, the industry has built-in protections with free-to-play offerings.An activity is considered gambling when customers pay for a random chance to win a prize of monetary value. Providing customers a way to win without paying makes the activity a sweepstakes, subject to looser regulations by states."A true free-alternative-method-of-entry option, if done right, does get you around the gambling laws," says I. Nelson Rose, a leading expert on gambling and sweepstakes law.All the most prominent digital repack firms provide no-purchase-necessary options. Holmberg and Courtyard.io CEO Nico le Jeune each described their platforms to Barron's as "gamified shopping."Free entry typically requires filling out an index card by hand and mailing it in a No. 10 envelope to a P.O. box. Barron's entered a GameStop sweepstakes offering a Pokémon card worth $80,000 and hasn't heard back.The sweepstakes entry instructions are hard to find, often buried in terms of service or attached to fine print on the websites. "That is an issue," Rose says, because no-purchase options are supposed to be obvious to the consumer. He adds that compliance is governed by state laws, as well as federal statute since the sweepstakes take place through U.S. mail.Rose says it has been years since mail-in sweepstakes laws were enforced.In response to Barron's questions, Arena Club said that its sweepstakes are separate offerings from its digital repacks.At a New York City convention in July hosted by Fanatics, attendees "come as a fan, leave as a collector." To that end, novices go through the Fanatics Collect Card Combine, an area of the convention where they learn trading cards' history, the basics of card grading, and how to safely store a collection. The experience concluded with collectors swiping an enormous touch screen to open a free Instant Rips pack and win a graded card stored in their Fanatics account. This reporter won a card featuring Terry Rozier, the basketball player indicted last year for his alleged role in an illegal gambling ring. He pleaded not guilty in December, and a trial is scheduled for February.Edward Pehlevanian of California-based card shop Rizo Sports manned the first station of the Fanatics combine and gave a crash course in buying physical card packs: "It all depends how much risk you want to take," he says. "Big risk, big reward." This reporter bought a $20 Pokémon pack, and was instructed by Pehlevanian to move a few cards from the back of the pack to the front before looking through them. The hit cards in Pokémon packs are typically in the middle, he explained-revealing them last prolongs "the sweat," or the anticipation of a potential hit.Barron's struck out: No hit, only a card that sells on eBay for 15 cents. The rest of the pack was similarly low value.Joe Orlando, once the president of PSA and former CEO of its parent company, Collectors, seems uneasy about the industry's evolution.In his youth, enthusiasts would assemble themed collections, such as every player on a roster from a specific season. Orlando says these days most collectors, including his two sons, seem more interested in the chase for so-called "hit cards," rare finds with astronomical market values. A sign at Fanatics' card combine said hits are "among the most desirable cards in a product and are often the centerpiece of a collector's hunt.""Think of what the word 'hit' embodies," Orlando says. He respects that there are many different kinds of collectors-but when you're only in it for the hits, "the question is: Is that collecting at all?"For digital-repack buyers, the hit is the point. GameStop and PSA use the slogan "Digital Packs, Real Hits" for their joint product.In an interview with Barron's, Warren Laufer, a former business development executive at both Arena Club and Fanatics Collectibles, describes it this way: "If you can just give them the hits, then they're gonna have a better experience-and they're going to be willing to pay for that better experience-compared to searching through boxes of cards with a lower expected value and hoping that you might get that one thing."Unlike cards discovered in a physical pack, the online hits are already authenticated and graded, easing their resale. In fact, digital repack users can decide on the spot to sell their cards back.Digital repacks are good for dealers too. Unlike most e-commerce sellers, Arena Club and their competitors don't face hefty shipping fees. Most cards never leave their warehouses. Collector Crypt's Holmberg says up to 98% of cards opened on his site are immediately sold back to the company.Public blockchain data assembled by crypto-research firm Blocmates shows that 178 card packs were opened for every one card that Collector Crypt shipped to customers over the past six months.Some of the digital repack sites that Barron's examined are virtually indistinguishable from online gambling sites. On GachaSlabz and Lootcase, the opening of virtual packs is modeled on a slot machine.Big hits are often celebrated like jackpots. On the community Discord server run by digital repack site MNSTR, an administrator replied to one happy customer: "This is a good lesson in why you should never stop gambling!"One thing that is different between online casinos and digital repack sites is the potential presence of children. GachaSlabz, Lootcase, and MNSTR, which didn't respond to requests for comments, are among the repack sites that don't require age verification to open packs."We need to start questioning if we're teaching kids gambling activities by having them be so heavily involved in what's going on," says Brett Abarbanel, the executive director of the International Gaming Institute at the University of Nevada.She says the trading card market "can drive a lot of positive human connection. But at the same time, how do you balance that with the fact that the way it's currently growing may be causing other people harm?"Arena Club said in its statement that it "believes that companies in the collectibles industry should be thoughtful about younger collectors and responsible participation" and said it doesn't market its platform to minors.In video advertisements Arena Club began running in July, fathers and sons bond over opening digital repacks together. "I'm able to recreate my childhood," one dad says; his kid chimes in, "Now we're ripping packs together." They fist bump as the dad delivers the tagline: "That excitement, that thrill-you'll be hooked!"Write to Nick Devor at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.