Headline: What are digital sports cards?


Body:  I remember being about 12 years old and I collected and traded baseball cards.  Quite a confession, I know.    People were serious enough about this hobby (read “obsession”) that there were magazines that were mainly devoted to supplying valuations for these cards.  I had a Cal Ripken Rookie card and I thought things couldn’t evolve any more.

I was wrong.

Now, there are digital sports cards being bought, sold and traded.   The Topps baseball card pack of the past would run you only a few bucks.   But, the digital sports cards of today (Think of them as NFTs) sometimes go for $150,000 or more.  And, you don’t EVEN get a single piece of fossilized, desiccated bubble gum.  Within the biz, these are called “moments.”  Most of these “moments” are reasonably priced at $10-$20, but a LeBron James dunk recently sold for $210,000.

Is this REALLY a Big Deal?

It would appear to be.     Started in October 2020, Top Shot already has 800,000 users and has registered almost $500 Million in revenue.  Dapper Labs is not doing this out of the goodness of their Canadian hearts,   the fee revenue is quite good.  Said the NBA Commissioner, “I think we’re just scratching the surface on what the potential is for blockchain to completely transform the digital collectibles industry.”

On the other hand, there are many who suggest that these digital sports cards will suffer the same ignominious fate as the founder’s previous project, CryptoKitties.  These also went up in value quickly… and then crashed.  In reply, Gharegozlou opines that he learned many important lessons from CryptoKitties, and will not make the same mistake with Top Shot.

What makes digital sports cards better than the physical sports cards?

By establishing the presence of the NFT on the blockchain, it makes it much harder to pass off bootleg copies as the real deal.   Since the ownership is permanently recorded in the blockchain, it is impossible to successfully create a copy that fools people.   In the case of digital sports cards, this also allows athletes the opportunity to monetize their images.

OK, so where do I go to purchase a digital sports card?

You have 2 options and there are advantages with each.   The first option is to go to Top Shot (or whatever the brand is) and purchase the NFT direct from them; Usually, you can even use a credit card.   The service will hold the NFT for you until you get another wallet.  The other option is to go to OpenSea or a similar exchange.  You might find a better deal here, but, you need to use a wallet (setup beforehand) filled with ETH (most likely.)  The thing to remember is that the rarer the clip (e.g. Alberto Bell hammering a Grand Slam) the more valuable it can potentially become.

This also brings up a new opportunity within a different debate.

For years now, the NCAA and the schools within the NCAA have been making money on the backs of their athletes.   For decades now, images of the athletes (along with their stats) have formed the basis of many sports-videogames.  Until now, the athletes have not gotten a cent, and would even get in trouble for receiving a submarine sandwich as a gift.  But now, there is NFTU which allows the university and athlete to profit.  West Virginia University has just joined this group.  (Did you know that they have a “Director of brand and trademark licensing?”  I didn’t.)  Both the players and the fans seem to be happy with this protocol:

“The relationship presents a win-win: fans are able to truly own and be a part of their favorite team on an interoperable and chain-agnostic platform, while the players themselves are able to generate revenue in entirely new ways that will be sustainable over time,”

Similar to many physical collectible trading cards, NFTU’s tokens are available in four rarities: common, premium, rare and ultra rare. Each animated NFT features an animated image of the player, along with their position, personal stats, jersey number, as well as music and sound effects. The platform, which currently only features basketball, announced Wednesday that it will soon add other sports, starting with football.

The Verdict

Digital sports cards are  an option for the person who wants to invest in NFTs.  The question is whether or not this will be an effective investment vehicle.     This is a tough call to make.   It’s akin to the question of whether or not investing in art is a good idea.  For most people, it is not, and they will lose a significant amount of their investment.  But, there are a few people who have a special understanding of the market (or a lucky charm hidden somewhere) who will make a big profit when they sell their work of Art.  I suspect that digital sports cards will be quite similar; Most will lose some money and a few will make a substantial profit.  If you find yourself in the 2nd group, please remember to throw a nice reception.   And, invite me.


Digital sports cards are receiving a popularity boost in the pandemic era | Fortune

Digital Collectibles: What They Are and How to Get Started (fool.com)

Reginald Grant & Cliff Pierre Launch NFTs By Athletes (yahoo.com)

West Virginia U. latest to join NFT marketplace for college sports (edscoop.com)

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

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