PSA Slapped With RICO Lawsuit

The first half of Funk’s complaint reads like a long list of quality control failures. PSA markets its grading as objective, standardized, and expert driven. The lawsuit argues the real process leans on a subjective “eye appeal” standard that lets an individual grader bump a card up or down based on a vague read of what the market will accept, not on fixed measurable criteria.

The most striking example in the filing is PSA’s very first certification. Certificate number 00000001 went to a T206 Honus Wagner that PSA’s own grader later admitted was trimmed, meaning altered to look better than it actually was. PSA’s published standards say altered cards will not be graded at all.

The complaint alleges PSA graded it anyway, gave it a Near Mint-Mint 8, and has never revoked that grade even after the trimming became public knowledge. That card eventually sold for $2.8 million while still sitting in its original PSA holder.

On their own, those allegations would amount to a case for sloppiness or incompetence in a product customers pay hundreds of millions of dollars for every year. Funk’s second claim is what turns this into a RICO suit.

PSA’s parent company, Collectors Holdings, does not just grade cards. It also owns the leading card pricing platform, a vault and resale service for graded cards, an instant cash offer program, and a lending arm that uses graded cards as collateral. Funk argues that gives Collectors a direct financial stake in the value and scarcity of the very cards PSA grades, which directly contradicts PSA’s own marketing that it has “no financial stake” in the cards it evaluates.

Funk’s own individual claim is small. He says he paid roughly $300 to have seven cards graded, including some Cal Ripken Jr. rookies, through a local card shop rather than a personal PSA account.

The classwide number is a different story. The complaint alleges PSA has generated more than $1 billion in “fraudulent” grading fees over the four year period the class covers. Because RICO allows courts to triple actual damages, that opening number could theoretically balloon to more than $3 billion if a judge accepted both the underlying damages figure and the RICO trebling argument.

We want to be upfront that we are just resellers and card enthusiasts here, not lawyers. These are purely our uninformed, layman opinions.

PSA’s grades have never been perfect. If you’ve ever sent a card in to get graded, you’ll know that the line between a 9 and a 10 is very thin, sometimes even invisible. In fact, it’s a well-known strategy among collectors and resellers to buy high quality PSA 9 cards, crack the slab, and send them back to PSA in the hopes that the next grader has a different opinion. That inconsistency being a real, common, exploitable pattern lines up with what Funk is alleging.

The population manipulation claim is extremely serious, and also the part we think will be hardest to prove. Collectors (the company) having a direct financial stake in the value of graded cards through its vault, resale, and lending businesses is a real structural conflict of interest, and there are scattered anecdotal reports from collectors who sold PSA 9s to the company only to later see the same cards relisted as PSA 10s.

Whether that pattern holds up as intentional, systemic manipulation once real internal documents get produced in discovery is a much bigger question. Proving that a company deliberately controls grade populations for profit, as opposed to just grading inconsistently, strikes us as a supremely difficult needle to thread.

We also think Funk faces an uphill climb trying to win damages purely because PSA misgraded cards, intentionally or not. Nobody grades 19 million cards a year without making mistakes, including trained experts, and we suspect a judge will be sympathetic to the argument that any business operating at PSA’s scale is going to make errors. If customers keep sending PSA their cards anyway, a court may simply treat that as the cost of doing business with a market leader.

This suit was only just filed. Assuming it survives PSA’s inevitable motion to dismiss, we are likely years away from any settlement or ruling that actually changes hands or grading standards.

This is a class action lawsuit, but that doesn’t mean that everyone who’s ever submitted a card to PSA will be eligible for settlement money. In fact, the class described is “anyone in the U.S. who, during the four years before filing, beneficially owned one or more cards submitted to PSA through a Card Grading Intermediary.” Take close note of that last caveat, as it excludes many independent collectors.

You may be eligible if:

• You paid a local card shop, dealer, or group submitter to send your cards to PSA sometime in the past four years
• You never personally opened or logged into a PSA submission account
• You paid or reimbursed PSA’s grading fees, even if the payment was routed through a shop or intermediary

You are likely not eligible if:

• You created your own PSA account and submitted cards directly through psacard.com
• All of your submissions went through your personal login rather than a shop or group submitter

Most everyday collectors who send their own cards straight to PSA are explicitly carved out of the class as currently defined. Funk’s legal strategy hinges on arguing that intermediary submitters like himself never saw or agreed to PSA’s arbitration clause and class action waiver, which direct account holders typically did accept when they signed up.

Nothing changes today. There is no claim form to fill out, no money on the table, and no guarantee this case even survives PSA’s first response. If you’ve only ever submitted cards directly to PSA under your own account, you are not currently part of the proposed class regardless of how this case turns out.

And even for those who are potentially covered, the headline $3 billion figure only holds up if a judge accepts both Funk’s underlying damages estimate and his RICO trebling argument, which is far from certain this early. We will keep an eye on this one and update you when there is real movement, whether that is a ruling on PSA’s expected motion to dismiss or any word on class certification.

This lawsuit is just the latest scandal to come out of the trading card industry lately. Earlier this year Hasbro shareholders sued the company over its handling of Magic: The Gathering, alleging deliberate overproduction and a scheme former employees called “Project Parachute” that flooded the market to hit quarterly numbers. Around the same time, Fanatics faced its own wave of accusations that employees were steering loaded boxes toward favored streamers during live breaks.

As the trading card market keeps climbing toward the tens of billions of dollars, it is becoming clearer that the incentive for insiders to tilt the odds grows right along with it.