From playground to Parliament

Pokémon trading cards were causing trouble on playgrounds around the US almost as soon as they made their debut in January 1999.

In May, the LA Times reported on measures schools were taking to combat the cards’ disruptive influence: Kids Told to Pocket Their Pokémons, the headline read.

“The children are beginning to become obsessed by them,” a principal who had banned trading between pupils said. “Some of our younger kids were getting suckered out of their more valuable cards.”

In other schools, they were banned entirely. A 7-year-old told the Times he didn’t bring his cards to school anymore because “the principal said he’d better not catch us trading.”

With a hint of disbelief, the Times noted that the rarest cards were selling for more than $50 each.

In October, the Times reported that the situation had escalated: Backlash Builds as Schoolyards Evolve Into Pokémon Trading Pits.

“School officials from Connecticut to California have concluded the cards are disrupting learning, poisoning playground friendships and causing such distraction that some children forget their homework, tune out in class and even miss school buses as they scramble to acquire one more card.”

One principal told the Times that children “were bringing cash wads of up to $40 to school, hoping to buy a coveted card.”

This set Pokémon apart from all previous schoolyard crazes.

“The thing with the Pokémon cards is that kids are really aware of their value,” a child psychologist said. At his son’s school, it had turned recess “into a little flea market,” he added. “They had their calculators out. It really became a buy-and-sell bazaar.”

The Times noted that prices for the most sought-after cards had appreciated to more than $100.

Twenty-seven years later, a 31-year-old sold an especially sought-after Pikachu Illustrator card to a 33-year-old for $16.5 million.

Printed in 1998, the card (pictured above) is one of just 39 copies ever produced and the only one graded Gem Mint 10 by PSA, the dominant card-grading company.

The seller was Logan Paul, a YouTube influencer and trading card enthusiast who had purchased the card five years earlier for $5.23 million. 

The buyer was venture capitalist AJ Scaramucci, who purchased it on behalf of a holding company he formed to acquire "culturally significant, scarce real-world collectibles."

Pokémon cards “should be treated as investments because that’s what they are,” Scaramucci said at the time. “It’s just obvious.”

They’ve certainly performed like it. The website Card Ladder estimates an index of top Pokémon cards has appreciated by 8,300% over the past 22 years.

Investors in the S&P 500 earned a comparatively pedestrian 902% in the same time period.

When, exactly, a collectible matures into an investment asset is in the eye of the beholder. Fine art, Swiss watches, classic cars, and French wine likely all qualify, having been purchased and held with the potential for price appreciation in mind for some time now.

Pokémon cards have joined that list of collectibles-turned-investment assets.

But they’ve also transcended it: The cards are now a strategic asset, too.

Last week was the inaugural meeting of Japan’s “Parliamentary League for the Promotion and Rule-Making of Trading Cards” — a group of Liberal Democratic Party lawmakers that seeks to both regulate and promote the market for Pokémon trading cards.

The group aims to “position trading cards as one of Japan's powerful IPs (intellectual properties),” a trading-card blogger said of the meeting, “and to support overseas expansion into the global market.”

The lawmakers are also considering measures to prevent counterfeiting and thwart the use of high-value cards in money laundering. Identification and record keeping may be required for large transactions.

“In the future,” the blogger adds, “government support measures for exports may be introduced, and safer international transaction rules may be established.”

In other words, the Japanese government is treating Pokémon cards as both a national treasure and a financialized asset.

That, I believe, is a first.

You don’t need an ID to buy a Swiss watch, for example. France has laws about cheese making, but none about the use of, say, camembert in financial transactions. Fine art is used for money laundering, but no government views it as a threat to their culture.  

Pokémon cards are different — a unique mix of collectible, national culture, and financialization. 

Unlike other collectibles, which become tradable only after collectors make them valuable, Pokémon cards were designed to be traded from the very start.

In schoolyards, at first, and then hobby shops, card shows and eBay. The highest-value cards even made it into auction houses.

Now, the trading is moving onchain.

It’s easy to see why. On eBay, buyers pay sales taxes and shipping costs. Sellers pay eBay as much as 12.35% of the purchase price. eBay itself pays substantial credit card fees. 

Most egregiously, the auction house that sold Logan Paul’s Pikachu Illustrator charges a headline rate of 24%. 

Cards traded onchain, by contrast, incur no credit card fees (only a tiny gas fee). There’s no sales tax, no matter where you live. And trading fees are minimal: Collector Crypt, for example, charges only 2% to transact on its marketplace.

$410 million of Pokémon cards traded on Collector Crypt in June, up from zero at the beginning of last year.

Onchain, Pokémon cards trade as NFTs — a tokenized receipt for cards that a marketplace like Collector Crypt warehouses on behalf of owners, similar to how many of the world’s most important assets trade. 

The GLD ETF, for example, is a receipt for gold held in bank vaults. SPY is a receipt for the stocks held by a custodian. 

Collector Crypt does the same for individual Pokémon cards.

(An ETF holding an index of the best cards doesn’t seem far off.)

The effect of this tokenization is perhaps best illustrated by the popularity of gachas, where users pay as much as $2,500 to win a random card — then immediately sell it and try again.

This kind of high-volume, gamified trading is only possible because blockchains make trading nearly frictionless.

But it’s more than just a game.

Tokenization is creating a liquid market for the first collectible to become a strategic asset.

— Byron Gilliam