Could box breaking be considered gambling or a lot...

A long-standing practice in the collectibles industry is facing scrutiny amid legal challenges levied at two live shopping platforms. Two separate legal claims say that "breaking," a practice in which sealed boxes of cards or memorabilia are opened on a livestream in front of individuals who purchased "slots" to claim pieces of the lot, could be considered unlawful gambling schemes. The claims say randomized box breaks are effectively unregulated games of chance. This spring, attorney Paul Lesko filed an arbitration demand against Whatnot on behalf of nearly 70 customers, and a separate lawsuit filed in July 2025 by another group of plaintiffs makes similar claims against Whatnot and Fanatics Live. Lesko told ESPN "the process should begin by mid-July." A spokesperson for Whatnot declined to comment on the arbitration demands. In a March statement following the filing, the company said, "We absolutely reject the characterization in this complaint." "Gambling isn't allowed on Whatnot, and we strictly enforce this policy," the company said in its statement. "Card breaks are a long-standing format in collecting -- at card shops, conventions, and in communities that have thrived for generations." A spokesperson for Fanatics declined to comment. ESPN spoke with legal experts, academics and hobby insiders to better understand card breaking, how gambling and lottery laws might apply and how the industry could change if the challenges are successful. What is box breaking? Breaking is when an individual (a breaker) takes a sealed product -- most often a box of sports cards, but sometimes signed apparel -- and opens it in front of (and on behalf of) a group of people, typically via a livestream. The practice has been commonplace in physical card shops for decades and exploded in popularity amid a surge in collectibles interest during the pandemic. Before opening the product, the breakers sell slots to buyers. Slots vary in scope and price, depending on the break; some slots might yield a buyer all cards in the box that feature a specific team, or a specific player. A New York Yankees slot, for example, is almost always more expensive than an Athletics slot, given the hobby value of their all-time rosters. In other situations, buyers pay a flat rate and the slots are randomized. The sealed product isn't opened until all slots are purchased. Once the product is opened -- usually on a platform like Whatnot, Fanatics Live, eBay Live, YouTube, Twitch or TikTok -- and the pulls revealed, the breaker mails the allocated products to the buyers. Before and during the COVID-19 pandemic, breaking was a way for average consumers to participate in the trade. But now that sports cards boxes can cost thousands -- sometimes tens of thousands -- of dollars, breakers must charge more for slots. Slot buyers are not guaranteed an item of equal or greater value in return. In fact, sometimes a particular slot might turn up empty, say, if a collector buys a Yankees slot and the box doesn't actually contain a Yankees card. But sometimes participants score big. In 2019, a buyer purchased a $50 randomized slot in a box of 2018-19 Panini Prizm Basketball cards and received the Dallas Mavericks as their slot. In the box was a Luka Dončić rookie-year 1-of-1 Nebula card. That card hasn't been publicly sold, but a Doncic parallel numbered to 10 from the same set graded a 10 by Professional Sports Authenticator (PSA) sold two years later for $780,000. More often, buyers receive products valued at a fraction of the price of the slot they purchased. "Chase" cards -- low-numbered inserts or parallels, short-printed case hits, autographed or patch autographed cards, and Logoman or Shield (autographed or not) cards -- are the most valuable modern cards. More expensive products have fewer, but overall rarer, cards per box, meaning fewer chances a slot will yield something of value, or "hit." (Some companies, such as Whatnot and Fanatics Live, stipulate every customer must receive at least one card per break ... but not all do. More on that later.) What are the definitions of gambling and lotteries? According to Cornell Law School, gambling is defined as someone risking "something of value (like money) based on a chance outcome that is out of their control or influence with the understanding" that they will either gain or lose versus that initial wager. In the U.S., gambling is regulated at the state level. But as a general definition, gambling has three elements -- a wager, a chance and a prize -- said University of California-Berkeley law school lecturer Rick Trachok. "Every state that regulates or prohibits gambling has those three elements in their statutes," said Trachok, who was a longtime gaming compliance executive. "It doesn't matter how you dress it up. If those elements are present, it's gambling." The legal definition of a lottery varies a bit from gambling. According to Cornell, a lottery is an arrangement in which participants buy in with the expectation that one participant or more, but not everyone, will receive something of higher value than what they contributed. Additionally, winners are chosen at random, via a game, or via means that the participant doesn't control. What are some of the details in the legal claims against Whatnot and Fanatics Live? In arbitration documents obtained by ESPN, Whatnot clients say the platform operates "unlawful schemes," focusing specifically on randomized and repack breaks. Repack breaks occur when product has been previously opened -- most often graded and repacked by third-party companies -- and resold; in these cases, breakers often tell buyers the floor and ceiling values in the repack. According to the arbitration demand, breakers on Whatnot use random tactics such as wheel spins, dice rolls or playing card draws to determine what each slot purchaser receives. The filings allege that randomized box breaks violate California's ban on illegal lotteries and randomized repack breaks constitute illegal sports trading card "grab bag" lotteries. The customers also claim Whatnot is operating and encouraging an "unregulated online casino where it exploits its customer base by encouraging compulsive spending." Lesko, the attorney filing the arbitration against Whatnot, also said there is a lack of oversight on repacks, with floors and ceilings "not even close" to matching comparable recent sales. He said his clients have spent more than $252 million on the Whatnot platform. A separate lawsuit, filed under California False Claims Act last July against Whatnot and Fanatics Live, was recently unsealed. The suit claims the companies operate "unlicensed box-break lotteries" and "knowingly failed to pay the required taxes and to obtain mandatory gambling and business licenses, all while profiting from an illicit enterprise that operates as an unregulated lottery." The whistleblower complaint includes 18 named plaintiffs across at least 11 states who've spent anywhere from a couple hundred dollars to upward of $4 million in breaks on Whatnot, Fanatics Live or both. The lawsuit asks that Whatnot "remove or disable its 'Breaks' feature and category unless and until it can be shown to operate without the elements of an illegal lottery" and that Fanatics "cease supplying product to unlicensed breaking operations and withdraw any support (financial, marketing or otherwise) from such operations in California." The lawsuit involving both Whatnot and Fanatics Live is a qui tam suit, meaning the plaintiffs can ask the government to take up the case on their behalf. A spokesman for California's Department of Justice said the office has "declined to intervene" in the case, and the plaintiffs have until August to decide if they want to proceed alone. In its previously released statement, Whatnot said, "While sellers who 'break' only make up 4 percent of sellers on our platform, we've taken care to bring that experience online in a way that holds everyone accountable. Whatnot shows happen live and on camera, sellers face real consequences when they break our rules. We've set the standard for how these formats work online, and we're committed to maintaining it." On its website, Whatnot says users must be 18 to have an individual account (or 13-17 with parental supervision). Could box breaking be considered gambling or a lottery? Trachok said breaking could indeed be considered gambling. "If I'm buying cards and I get what I pay for, there's no gambling involved," he said. "But if the attraction is, 'I have the chance to receive a lot more than what I've paid for it'? That's a wager. Then the expensive card [is] the prize." California-based attorney Armen Vartian, whose firm specializes in art and collectibles law, said he advises clients who engage in breaking to make sure all buyers receive something in return, otherwise the arrangement could be considered a lottery. But both Vartian and Trachok said that just because everyone who participates in a break gets a card doesn't mean the practice is worthwhile for consumers. "My problem with breaking is 85% of the people take a financial hit, where they're not getting anywhere close to what they put in," said Rob Veres, who has owned Burbank Sportscards in California since 1988. "A lot of times, people involved in breaking are new to the hobby; these aren't seasoned people that have been in it for a few years -- those people have already figured out that this isn't the best way to participate." Veres said his shop, one of the country's largest, has never engaged in breaking. He said he disagrees with "the gamification of the hobby." "People say, 'What's the difference between people opening a box in your shop and doing a break?'" Veres says. "If there are 30 spots, each spot averages, let's say, $50? So, it's a $1,500 box, but it's $1,100 on my shelf. For the people who say it's more affordable to get into a break, I say, 'You're paying 40% more per card, how is that more affordable?'" Attorneys interviewed by ESPN said the legal definition of gambling could technically apply to collecting sports cards for profit in general, not just breaks. The odds of getting a six-figure-plus chase card from purchasing a box are slim, but not impossible, and some buyers purchase boxes with the express hope of landing one. Companies who sell cards publicize the odds of receiving "chase" cards from boxes, and marketplaces auctioning cards routinely publicize how much "chase" cards sell for. "It's inherent in creating modern collectibles that there are only a few people that are going to get the big cards, and there's a lot of money in chasing those," Vartian said. "It's always been a bit of a game, but I always felt better when it was just somebody going to a card shop or Target and getting lucky. I kind of wish it had stayed with that." Jeff Ifrah, a gaming and licensing law specialist, said collecting-as-gambling historically has been difficult to prove in court. "I don't think we've ever had someone at that level look and analyze this -- they never get to the question of whether or not [collecting] is actually gambling activity," Ifrah said. "If I'm buying to get a certain Sidney Crosby or David Pastrnak card, and repeating the behavior to do so ... is that gambling or a bona fide purchase? This is the way cards have been sold." What policies do collectibles and social media companies have regarding breaking? Breaks occur on livestreams across a host of sites, but many companies prohibit formats that could be considered lotteries. TikTok's gambling policy states that "gambling and games of chance are prohibited on TikTok Shop, including raffles, spins, sweepstakes, and any content where users pay for a chance to win." The company states only "approved sellers" can offer breaks using sealed products, and that livestreaming breaking is only allowed in the U.S. Twitch prohibits "any streaming of listed sites that contain slots, roulette, and dice games and are unlicensed in the U.S. or other jurisdictions that offer consumer protections like deposit limits, waiting periods, and age verification systems." A YouTube spokesperson told ESPN that, while breaking is allow on their platform and the monetary aspect doesn't violate their policies, they strictly prohibit content that promotes online gambling websites that haven't been certified by their parent company, Google. (A request for comment from Meta, which owns Instagram, was not returned.) EBay prohibits "chance listings," including contests, lotteries, raffles or random drawings. The company allows case, box and pack breaks by preapproved sellers and "the buyer must receive the entire pack, box or slot they purchased," as well as grab bags/mystery boxes if the listing contains: "general information about what is included" and "does not single out items with monetary or collector's value unless they are included with every purchase." Giveaways and sweepstakes "must be pre-approved and conducted through an official partnership with eBay through eBay Live." Fanatics Live has a similar policy, which "prohibits gambling on its Platform and Sellers are prohibited from using the Platform to engage in or to facilitate gambling. Accordingly, Duck Races, Spins, Rolls, Raffles, Roulette Wheels, and third-party randomized results are not permitted on Fanatics Live." What could this legal action mean for Whatnot and other companies? While the arbitration process is yet to get underway, Lesko's filings -- and potentially the lawsuit -- could have implications on how breaking is conducted moving forward. Lesko's filings allege that Whatnot is violating California's law, so the outcome of case may hinge on whether law applies to where the company is headquartered or where the customers are located when they buy a slot. Trachok said that, if an arbitrator finds in favor of the plaintiffs, California officials like the attorney general or district attorneys could choose to enforce the laws that prohibit unlicensed lotteries and gambling. Ifrah said lawyers could file the decision in state district and federal court to have it affirmed. In the civil lawsuit, a jury will have to decide whether the plaintiffs proved their case. If either happens, attorneys interviewed by ESPN said, the companies might have to alter their policies or practices. Trachok also said that, historically, if an entity is ruled to be an unlawful gambling enterprise, customers can be reimbursed. Lesko, who said he unsuccessfully approached Whatnot in October hoping to settle outside of arbitration, told ESPN that reimbursement for his clients isn't the only goal. After news of the filings broke in March, an additional 200 people contacted him. "Yes, we wanted compensation for our clients," Lesko told ESPN. "But we wanted them to make changes to the platform, too."