Digital Card Pack Sector Hits $2 Billion Per Year

A Bank of America report says the digital pack opening sector has reached an annual run rate of $2 billion. According to a report obtained by Sportico, the number of active users on digital opening platforms rose 34-fold over the last 12 months, from 50 thousand to 1.7 million people.

Ken Goldin, founder of Goldin Auctions and the face of the Netflix series King of Collectibles: The Goldin Touch, believes digital openings are the same thing as gambling, even if they are not called that. Describing the worst-case scenario to Sportico, Goldin said, "Isn't this just a slot machine for kids?" Bank of America also compared the sector's economics to a slot machine in its report.

Digital openings are designed as an extension of the collectibles sector. A user buys a digital pack, and the app reveals a single card. The user can keep the card, ask for it to be shipped, or sell it back to the platform. Instant buyback offers are usually around 85 to 90 percent of the card's estimated value, and some platforms pay in site credit instead of cash. Operators keep at least 6 percent of pack sales. According to Bank of America, the average value of the card inside each pack is below the pack price. According to Sportico, most users sell their cards back right away.

The model is attractive to betting operators. Digital openings are regulated as e-commerce rather than gambling. This means companies can offer the product nationwide without paying the taxes applied to sports betting or online casinos. Underdog and PrizePicks led the way in this area. PrizePicks launched its product, called PrizePicks Packs, on October 21 in 50 states and Washington, D.C. OG.com and Crypto.com followed. FanDuel is testing openings through its rewards program. Some companies defend these products as a natural extension of the collectibles sector. Customers can also request that the physical cards they pull be shipped to them.

The Bank of America report says that if digital openings continue to grow, the sector may face closer scrutiny. The same report notes that legal experts believe the category rests on a solid regulatory footing as long as the cards are backed by physical inventory.