I want to say at the outset that I love the sports card hobby! It has completely stolen my heart. I have been collecting since the age of 8 and will buy and sell sports cards until I leave Earth. That said, as more people enter or return to the hobby and commentators talk about “investing” and “profiting” on card transactions, it is important to keep in mind some of the risks associated with the industry.
Anytime there is the potential to make money, there will be those who attempt to gain through dishonest means. Unfortunately, this is becoming more prevalent in the card hobby. One way unscrupulous parties are taking advantage of hobbyists is by altering cards in such a way that the card appears to be in better condition than it is. This allows the perpetrator to sell the card for a higher price. Even more troubling is that some of these manipulated cards appear to have made it into grading company slabs.
A second way bad actors are taking advantage of the hobby is through shill bidding. Shill bidding is when someone bids on an auction item with an intention to artificially increase its price. This practice is illegal in the United States under the Donnelly Act which addresses rigging and price fixing. Auctions involving consignment companies are particularly susceptible to shill bidding. In addition, if you are involved in an auction and you are bidding against one or more individuals with low feedback ratings (i.e. less than 10), it is a strong possibility that there is shill bidding happening.
In order to protect yourself against altered cards and shill bidding it is important to remain patient and educate oneself. What should a card look like? What are signs that a card has been trimmed, washed or otherwise modified? What does a card typically sell for? These are smart questions to ask before making any purchase, but especially prudent to consider before shelling out $100 or more for a piece of cardboard.
Investing vs. Gambling
Increasingly, hobby commentators are using terms like “investing”, “return on investment”, and “personal account/collection”. These all sound sophisticated and are borrowed directly from the investment banking world. However, do not make the mistake of equating buying sports cards with investing in securities. Stocks and bonds differ from sports cards in that they are:
- More regulated
- More liquid
- Sold at a higher volume
- Backed by physical assets
- Clear in number available (more on this later!)
The goal of an investor is to make money. In order to do this, it is critical to make informed decisions when selecting an investment option. Well-established picks with a solid historical performance tend to be less risky than something shiny and new. This applies to companies as well as athletes.
Your best moneymaking choice may be to put your cash in a couple of solid dividend stocks. This action will not get you Instagram likes or increase your Twitter followers, but in 20 years you will be better off than the person who used that money to “invest” in Juan Soto rookie cards.
So, if sports cards are not investments in the traditional sense, what are they? It is my belief that most sports card speculators have more in common with the average gambler than the typical investor. The majority of card flippers are playing a game of chance with their purchases, basing their buying and selling decisions on precious little hard data. If you live in a state where it is legal, and you want to bet on athletic outcomes, you would be better off playing daily fantasy online. In online gambling, the payoff for the correct bet is almost immediate. Furthermore, your profit results are strictly based on on-field action rather than peripheral things like card condition and print runs. Which leads us to…
Print Run Opacity
Product print runs are my biggest concern in the hobby today. This is a risk you must make peace with if you are investing any amount of money in sports cards. Card companies historically have been guarded when disclosing how many cards they have released into the market. This is difficult for investors because it makes it extremely challenging to assess the supply side of the item in which they have staked their cash.
It appears that card companies are ramping up production. A recent check of the PSA population report shows that the company has already graded almost 18,000 Luka Doncic Panini Prizm rookie cards and more than 13,000 Zion Williamson Panini Prizm rookie cards. This is only graded cards from one of the grading companies. With this in mind, how many copies of these cards are out there? 50,000? 100,000? With print runs potentially at that level, it is difficult to believe that Luka and Zion rookies will increase substantially from their current values even if they pull off hall of fame careers.
There are those who will point to an influx of buyers into the hobby recently as a factor that will offset the overproduction scenario I have outlined. I have my doubts, but we will have to wait to see how this plays out over the next several years.
Ultimately, each person has to make a personal decision about the risks outlined in this post, but for those of you planning to send your kids to college in 10 years by selling your box of Luka Doncic graded rookie cards, I fear that a day of reckoning is coming.
How about you? Are there other sports card industry risks that are not covered here? Do you think any of the risks I discussed are overblown? I would love to hear from you! Please leave your comments in the section below.
Dan is married, has a daughter and son, and spends most of his days engaged in financial compliance activities for an insurance company. He has been known to overuse caffeine and has been collecting and trading sports memorabilia since 1985.