Its been almost six months since I have posted on this site, mainly because I have found that long form writing about cards has basically run its course for me. I still like to write, and do so a lot on my other sites and Twitter, but its important to recognize that I feel like the voice of Sports Cards Uncensored has moved to other places online.

Because those places limit the ability I have to write in any extensive or in depth sort of fashion, posting my thoughts here in a longer version seems to be the way to do it, especially for a subject as long and as involved as grading.

I have written more in depth explanations of my feelings surrounding the business of grading than many topics here on the blog over the years, but I feel its time to revisit those arguments. First because the collecting boom we are experiencing is unlike anything I have ever experienced in the history of my involvement with the hobby, and second because this boom hinges almost implicitly on high grade cards.

Background

Lets start back around the beginning of all of this craziness – not 11 months ago, Im talking about back when grading first got its start. Around 1991, PSA started grading the condition of trading cards. BGS and SGC started a few years after that. Because almost every sale was done in person, and the internet’s treasure trove of information wasnt the standard of gathering education, PSA’s service hinged on providing two things – condition opinions and authenticity opinions.

The mid 1990s were a similarly hot time to be a collector, with the first really crazy numbers being achieved for sales of rare and vintage cards. It spurred everyone and their mother (literally) to go out and try to find the next treasure to pass to their children in 30 years. This led to a few things, including more money flowing through the hobby, and of course, more issues with people taking advantage of new collectors who didnt know any better.

With a service like what PSA offered, collectors could at least feel safe that what they were getting was A) authentic, B) the right condition, and C) the right price. The consideration of a high grade card bringing more value was only really present in cards that condition issues ranged from poor to mint, not mint to gem mint the way it is today.

When eBay began globalizing the collecting economy through their auction site, a new reason for grading became very prevalent that was similar to the original purpose of the service. Most digital cameras were low resolution and may not offer the same level of sharpness to determine condition from a sale not completed in person.

A New Era of Graded Cards

Fast forward a few years to 2005, internet sales have become the new way to operate in the hobby, digital photography has advanced significantly, and grading has shifted away from its original purpose of peace of mind. Thanks to a new phase of collecting where collectors looked to seek out high grade cards of prospects and upcoming stars for sales later on, grading has become as much of a money making tool as anything.

Because the technology had improved and the methods of completing internet sales had changed, the original purpose of condition verification is really no longer needed in the same way. The split of modern and vintage had switched completely, with a new generation of cards that rarely achieved grades below 8. The grading spectrum had become all about mint and hyper mint grading, with miniscule condition variations separating the entire population of cards.

It was no longer about vintage cards that ranged from destroyed to generally mint. The cards were newer, the condition was rarely an issue, and collectors chose the best examples to send in for grading. It skewed the population in a way that was likely never considered, and created a need to market in a new way. Instead of marketing around verification, the grading companies needed to market volume, capacity, reputation, and the true trump card, VALUE in the completed product.

High grade examples of modern cards had been seen by the collecting base as a gem of their collection, leading to collectors seeking out and paying more for those cards. The subjective opinion of the grading companies had become the bible, rarely questioned, and rarely in need of accountability by the buying public.

As the shift to making money became the primary driver of the graded card collecting public, the grading companies recognized the true business opportunity early on. As a result, the way the industry was marketed and solicited changed as well. This is where my main issues started to become the norm, focusing on the giant conflicts of interest that are created by monetizing a subjective opinion with the promise of making money over a raw example.

Today’s Exploding Market

Right now, if a top card isnt graded, there is likely a reason. Whether it is altered, in unfavorable (but still far from poor) condition, or just not authetnic at all, its hard to want to spend hundreds, thousands or hundreds of thousands of dollars on a raw card.

Similarly, graded cards have achieved celebrity status during the recent Pandemic Era due to high visibility personalities showing their desire to invest in high grade examples of cards from across the hobby.

Due to the huge multipliers that are achieved by hyper mint condition cards, the grading companies have been overwhelmed. Its almost a result of their own doing, with many of the grading companies creating new tactics, like the BGS Black Label, to give competitive collectors a new avenue to get the best of the best for their collection.

Auction houses have started soliciting sports cards in a way that highlights the need for top condition cards, with the velvet rope area of the hobby functioning solely on high grade examples of the main rookie cards and chrome cards.

Some of these cards have become so important and so valuable that the $10,000 modern card ceiling has been obliterated. Just a few years ago, a card wasnt TRULY part of the champagne room until it was over 10,000 dollars. Today, that number is closer to $100,000 if not $500,000. The high grade Michael Jordan RCs have gone from a $25k win to a $500k windfall, and its all because of a subjective opinion from a company that requires no transparency and no accountability to the grades they provide.

Examining the Issues with the Process

With more and more high dollar sales being completed, my main issue centers around the process itself. Every business needs a proprietary offer that separates them from competition. Grading seems to be no different, trying to build in proprietary features for both the end product and the process to create the end product.

That’s where the issues start. The product that all the grading companies sell is their opinion. Unlike other opinion based services, the grading opinion is absolute and without evidence. If a card receives a hyper mint grade, that grade is likely going to exist forever. More importantly, there is ZERO information as to why the grade is what it is. BGS may peel the curtain back a small amount with subgrades, but its still just a number on a flip.

There is not a single prominent grading company in existence that offers any transparency beyond the number on the slab, and that is a huge problem when you are looking to pay the high prices that have been assigned to high grade cards over the past two decades. Both PSA and BGS cite trade secrets as to the nature of their process, and point to specific definitions on their site. Most collectors site the fact that the reputation and value is earned through results, but I would argue that the process itself might be the biggest part of the conflict of interest in its own right.

More importantly, with such insane money value assigned to high grade cards, most of the savvy collectors and dealers have found the easiest ways to manipulate the system to get the desired results. Basically, let me put it this way – a grade is only final to many participants when it reaches the highest possible grade. The condition of the cards never change, but because the difference between a 9.5 and a 10 is microscopic, it brings a game element to trying to catch a better grade just through subjective opinion.

One grader may have one opinion, another grader may have another. There are also multiple companies with multiple graders, which means that it becomes very easy to game the system. Resubbing cards has become a seven figure venture for many dealers, especially ones with people on staff who know how to play the game.

Add in that once a grade reaches the desired level, it is there forever. There is no need to validate the opinion in any way, shape or form. The lack of accountability, tracking and regulation drives the entire business side of the grading industry, and we havent even gotten to the relationship side of things.

More importantly, over the last 10-15 years, high value sales have generated major and mainstream national attention. Assigning a high grade to a card, without accountability can easily drive publicity for the grading company and their wares. I remember back a number of years ago, a Joe Montana rookie was assinged a BGS 10 at the national convention. This was a top cards, with a top grade, at the top show in the land. Tell me that isnt a perfect recipe.

These sorts of things make for some very interesting bedfellows, especially when the process itself is shrouded in a veil of trade secrets. There are people out there who can speak to the level of attention that is present across the entire grading spectrum, but its hard to ignore how many major issues exist.

More importantly, with attention comes time, and we are getting a first hand exposition into what happens when a process is ill equipped to handle volume, and may not have been equipped in the first place for any real volume at all. To microscopically examine every card takes time, and if people believe that the same attention is paid to each example, I have a bridge in Brooklyn I would love to sell you.

That doesnt necessarily mean that zero attention is paid, but I can only imagine how many of the mistakes that are frequently called out are the result of speed review rather than a truly air tight process. Remember, these are humans with an inherent bias that populate the employee ranks of these companies – not machines. Theoretically, machines can speed up without error, or at least have a scientific explanation of what risks are involved with more speed. Humans on the other hand, cannot add speed without loss in accuracy, which means the only solution to any volume process is more humans, not more speed.

Lastly, there is very little accountability in the tracking of completed graded cards, despite the PSA set registry being a major driving force in competition among collectors. Even though PSA has record of every grade they have ever given out, and shares that publicly, they do not publicly track which card crosses their path, and how many times that card has been submitted.

This creates a giant hole in exploiting the system, with grades frequently increasing the condition result, even if the card is exactly the same. No doubt, humans make mistakes that should have an escalation process to fix, but when a card numbered to 50 is submitted 180 times, its clear what is going on.

Relationships and Conflicts of Interest

For the majority of the time that modern cards have become the focus of grading, the conflicts of interest and creation of marketing tactics to sell more volume have brought my view of the grading business to an all time low.

Grading is a business and businesses exist to make money. Period. End of story. For a long time, grading was competitive, expensive and risky. Creating relationships with customers was a primary need for each business and creating value in their process had to be done organically, not systemically.

The grading companies had to show that the population was creating additional value in their high grade cards, and on the flip side, they had to create more opportunities for more value in the end result of their opinions. This meant things like preferential treatment, more grading styles, higher focus on partnerships, and offering bulk submissions had to become the standards.

Lets start with the creation of Hyper Mint condition, because that is what has made the grading business what it is. Before grading the best a card could be was Mint Condition. Sharp corners, straight edges, and bright colors with no defects on the surface. With grading, it has become about microscopic perfection, including some that I would argue are more of a made up qualifier than an actual condition to occupy.

BGS took it a step further with the creation of subgrades and eventually a black label for all cards that get four 10s across the four subgrade categories. This is nothing more than a sales tactic, but through marketing and contrived collector acceptance of a higher value for these cards, it has become a way to achieve exponential new value in an otherwise raw card.

Hyper mint does not need to exist. But I equivocate its creation to that of the Diamond business, where marketing and product placement achieved a perceived value in a common stone that has persisted to this day. DeBeers and their advertising department is responsible for the value a diamond has in today’s society. It has become generally accepted that their marketing is the truth, offering extreme value for a stone that was used for industrial functions during WWII.

This leads to another major conflict of interest in the relationships that are available and how it influences grades. Im in sales, and for each one of my top customers I do a few things. I give them better attention, better representation, and more perks. Otherwise, they will go somewhere else. In it’s essence, the creation of a business around a service means that this type of relationship is inherent to the process.

A customer that subs 500,000 should not get any different grade that a single sub customer will get. The fact of the matter is that we can assume the mass submission center is submitting that much for a few reasons. They find the process enjoyable, they make money, but most importantly, they get the results they want.

In listening to podcasts, reading blogs, and participating in message boards for years, its clear that relationships with the grading companies exist. Although accusations have been tossed around regarding preferential treatment, it should just be assumed that it is the case. It has to be the case, because the business model is ripe for that type of manipulation. There is also no grading ethics committee, no federal committee on grading, there is nothing holding the grading companies back from giving this treatment to their top customers other than their reputation.

One could argue that this reputation is too important to risk, but at this point, with over a billion graded cards in existence or coming into existence, a scandal surrounding the top submission machines would not only not hurt anything, it has already happened.

In fact, scandal and lawsuits have existed all over the grading industry for decades. When the feds raided the NSCC a few years ago, grading companies were at the center of that investigation. The ownership of each grading company has repeatedly found themselves at the center of scandal, with the feds, the grading public, and the businesses built around them frequently having reason to get involved.

None of this has struck a chord with any collectors, as we have seen, with trimming scandals, authenticating counterfeits or any of those major misdeeds having any impact on the value of a high grade card.

In fact, things have gotten so busy for the grading companies, price hikes have been announced without adding any additional service, any additional feature, and as if this wasnt comical enough, likely a promise for slower service. This isnt a service anymore though, it seems more like an elaborate grift.

This timing situation creates a situation that I find shocking hasnt taken more of a hold in the recent hobby explosion. Most cards need to be graded to achieve their top sell value. At the same time, most grading can take 6-10 months at this point, unless you are willing to pay hundreds of dollars per card. Add in that boxes now cost 10x-50x what they used to cost, the expectation of grading is asking people to take out a six month, interest free, deposit just to sell what they pull out of a box.

The buyer’s expectation demanding a card be hyper mint to achieve the full value is just insane, and the fact that sellers (not high volume dealers) put up with it, depends on their liquidity used to buy the inflated boxes and inflated cost of raw cards. Pretty crazy to say the least. Its almost removed the casual wax breaker from the hobby.

How Do We Fix The Issues?

So far this post has been all about what is baked into the grading business as a drawback. If all these things are the problem, how do you fix it?

Honestly, that’s where things get even more complicated. Removing the lack of accountability and lack of transparency will only hurt the people making the most money off graded cards. They thrive on exploiting the gaps that exist so that they can turn a 1x profit into a 100x or 1000x venture.

Until the transparency around the process is fixed, grading companies take an active role in providing both an ethical service and one that offers clear tracking, none of the issues I have will ever stand a chance of reaching an above board level.

There have been new grading companies that have come on board and worked to offer exactly that, but they are a small minnow in an ocean of PSA and BGS, with a very small chance of success.

I also believe that the government is likely going to need to get involved, as the industry has reached a point that makes it impossible to hide in the shadows of irrelevancy. There is no doubt that class action lawsuits are likely on the way, and major federal investigations will follow. Too many people have spent too much money, and the government will want to collect their cut. They will also want to ensure that no one is effectively and deliberately running the circle jerk that seems to have taken over the hobby.

To close, this post is the equivalent of screaming into a tornado the size of Chicago. There is no way anyone is going to take what I say and apply it in any meaningful way. When investors and new hobby participants are joining the ranks and jumping directly into the deep end of graded cards, they will assume their collection cannot be important without the best graded examples.

Its a self perpetuating daisy chain of ignorance, with many collectors acknowledging that the money they make is more important than the sanctity of the process. Not only can I not blame them for their feelings, I actually understand their position more than people think.

I just hope that a new influx of ownership and more familiarity with the pitfalls of the process leads to a better understanding with the general public. I doubt it will have an impact, but we can always hope. Crazier things have happened right?