Thread by @SethAbramson

(THREAD) In 2022, Americans will hear a *lot* about Wata Games, video game "grading" generally, and the speculative bubble surrounding video games as an "alternative asset class." I suspect many major media outlets will be doing investigative reporting on this.

Here's a preview.

1/ The first thing to understand is that this is *not* a story about video games. It's a story about money.

And it may well end up being a *scandal* about money—which tells us that it will be the subject of significant investigative reporting and will enter public consciousness.

2/ I started doing market research, curatorial journalism, and embedded investigation on America's hottest new market a couple months ago.

My early findings and my hard data can be found at Proof Games, which launched in May with a focus on mobile gaming. sethabramson.substack.com/s/games

3/ The moment you start investigating video game grading, you get suspicious. For instance, every collectibles market has "population reports"—sometimes free, sometimes available at small cost—which inform hobbyists and investors how rare each item is in each type of "condition."

4/ In video game grading, there were two grading houses...and zero population reports. One 16-year-old house had gone 16 years without ever issuing one, while the newer house, Wata Games, had gone its well over three years in operation without ever issuing one. It was a red flag.

5/ The older house, VGA, had an FAQ that didn't even mention population reports—though the question VGA gets asked more than any other, without question, is "Where are your population reports?" The newer house, Wata, did the same thing—excised the very *concept* from its website.

6/ And yet there were whispers that *certain* sellers had been able to get non-public population report data—an indication of illicit market manipulation, as population report data is *insanely* valuable in a collectibles market and those who have that data have an enormous edge.

7/ At one point Wata had an "API leak"—their website interface was delivering game-by-game "pop report" data to individuals who went on the site and "liked" or "tracked" individual games. The leak was quickly plugged (it was a coding issue) but the data got out and made a splash.

8/ What the data showed was that a *vanishingly* small number of games were being graded as a percentage of each console's game library.

We'll take the Nintendo Entertainment System as an example. The NES had—depending on how you count—between 800 and 1000 games in its library.

9/ What Wata's internal data showed—and again, to be clear, this *wasn't* an illegal hack, this was Wata accidentally releasing data to the public that it didn't mean to release—was that in 3+ years in operation, Wata had graded the most-graded NES game approximately 750 times.

10/ But by the time you got down to the 10th most-graded game—again, out of 800 to 1000 games—you saw in the data that Wata was grading *that* game approximately 5x/month. It made a journalist like me wonder, how often was the 50th most-graded game being graded. The 100th? 400th?

11/ At the time, Wata was saying that it needed more than three years of grading to release even *one* population report, because if it released one earlier it might be... misleading.

Suddenly, investors congregating online had an inkling of what Wata was really worried about.

12/ Not to put too fine a point on it, but all the graded video games that were being sold at auction for four-, five-, six-, or even seven-figure sums *weren't rare*. They were going through Wata so regularly that over a decade you'd expect *thousands* of them in the market.

13/ Meanwhile, the *actually* rare games in the sealed-and-graded market—keeping in mind that, pre-Wata, video game collecting had almost always been marked (as most collectible markets in the U.S. are) by an emphasis on *rarity*—seemed to have been given no market value at all.

14/ When the Wata data hit online groups, it caused a stir. But in one of the most popular Facebook groups for Wata-graded game collectors, the data was quickly... disappeared. Removed.

Why, you'd ask? Buyers had been looking for this data for 16 years (VGA) and 3 years (Wata)!

15/ The reason I was given for the removal of this extremely valuable data is that the moderators of this Facebook group were concerned about *Wata's reaction*—they didn't want Wata to be upset with them. That seemed odd to me as a journalist—until I realized something amazing.

16/ The realization I came to—after talking to a large number of occupants of Facebook's largest Wata-themed groups—was that nearly everyone in the groups... was a seller, not a buyer.

Huh?

How could that even be possible? Well, that's something this thread is going to explain.

17/ In a speculative market bubble that's been artificially created, you'd expect sellers to be ubiquitous—and that's just what's happened with video game collecting. Almost like a self-springing Ponzi scheme, sellers sell to sellers over and over, thereby sending prices skyward.

18/ As each successive seller raises the price of a game higher and higher—flipping games daily—actual earnest buyers (hobbyist collectors *not* looking to sell what they buy) get priced out of the market almost immediately.

Which is unsurprising, as the market isn't *for* them.

19/ Instead, the market gets used for speculation—like a stock market. It exists to make rich people richer, with the big sellers getting very rich indeed.

In this artificial market, every seller has two critical, indispensable partners: the grading house and the auction house.

20/ Because the online groups tasked with creating a "culture" around game collecting were being run by sellers selling to other sellers, and were largely populated by sellers selling to other sellers, they *could not* make an enemy of Wata, the chief grading house in the market.

21/ And so hard data that the *very* small number of earnest buyers in this artificial market had been hunting for for literally years and years was *deliberately disappeared* in order to keep the grading house that gave it away accidentally happy. Buyers' interests were ignored.

22/ The problem, of course, was that video game buyers had (have) no advocates in or around the market. The market is unregulated; no one holds it to any ethical standards; it was created by and for people with no interest in changing it; and most game collectors have shunned it.

23/ This last point is key. As a gamer since 1981, I have no issue whatsoever with earnest buyers wanting to buy "framed" like-new versions of games they've long played and loved so that they can be displayed as art. But I'm in a distinct minority in that view and in this market.

24/ When Wata emerged as a behemoth—so big it was recently bought out by an even bigger one—most longtime collectors were disgusted by the grading culture and turned away from it. A few foolish middle-class collectors decided to try to become investors and swim with the big fish.

25/ This left virtually no one in the market who was an earnest buyer (rather than re-seller) of graded games. Every online group—I went to Reddit, Facebook, Instagram, many collecting websites—either shunned grading or was composed of sellers and re-sellers *almost exclusively*.

26/ Proof Games started doing large-scale market research to try to get a snapshot of what was going on. Which games were ubiquitous but still strangely overpriced? Which games were invisible but scarce? I prefaced all my reports with essays expressing grave concerns about Wata.

27/ Eventually, I sought to publish links to these reports in one of the most popular Facebook Wata-themed groups run largely by and for sellers and re-sellers. And what followed was one of the more amazing weeks I've had in 27 years as a journalist. It was... *very* eye-opening.

28/ The market research, which was merely *public data* intended to aid earnest buyers, was descended upon in the same way piranhas descend upon fresh meat. The richest sellers in the group immediately started complaining—they wanted the information to be disappeared immediately.

29/ I was attacked in countless ways—including being accused of being a fraud, a liar, and not an attorney. (I don't mean "not a currently practicing attorney," I mean that for the first time in years of being trolled online, I had people trying to claim I'd never practiced law).

30/ The sellers responded to the data by frantically claiming that population reports would be "coming" soon—for certain—from Wata or VGA, though the two grading houses (the only two of any size or significance) had spent a combined *two decades* not issuing *any* such reports.

31/ The sellers falsely claimed that five-, six-, and seven-figure sales were ubiquitous, would only continue, would only be aided by pop reports... even though the market research was showing all of that to be false. The sellers then claimed most of the big deals were...private.

32/ I'd never in my professional life been confronted by individuals so conspicuously terrified of losing their profit margin in an artificial market—and keep in mind that, as a former public defender, I used to represent defendants charged with fraud and several breeds of theft.

33/ Eventually, the administrators got together in secret and amended the rules of the group to make it cause for banishment to publish a link to a subscription website (this was their fifth/sixth different basis for attacking, deleting, or otherwise impeding the research data).

34/ In short, the premise was that unless someone was willing to do hundreds of hours of market research for free—and keep in mind, this edict was being issued by business associates of a grading house unethically hiding its market research to make millions—it couldn't be posted.

35/ (Needless to say, if a journalist were to do hundreds of hours of research and publish the result independently of a media outlet that receives subscriptions, the group would've found a new reason to disappear the data—just as it did to the free, public, revealing Wata data.)

36/ Every YouTube video I've watched as a journalist with an interest in gaming, every FB group I've been involved in as a journalist with an interest in gaming, has been the same: it's men selling games at insane prices and creating a culture in which this (and Wata) are lauded.

37/ All the foregoing is the "PG"-rated part of the story. I'll let the documentary below inform you of where things start to get really ugly.

Trust me, it takes no interest in gaming to be interested in this—simply a sociological interest in human greed.

38/ Some of the issues above I covered at Proof: the hiding of population data; the apparent collusion between grading houses and auction houses; the unethical involvement in the market by those who claim to be disinterested middlemen in the market; false advertising everywhere.

39/ I've even seen a collector who claimed (with evidence) to have been harmed by Wata to the tune of tens of thousands of dollars—did I mention you can't get them on the phone or email anymore, and they're getting regular BBB complaints?—get silenced by the admins of a FB group.

40/ It's sad to watch people who think they're good people get so consumed by personal interest that they march, zombie-like, into actual evil. But then, maybe that's why this story fascinates me: it mirrors what we have seen in Trumpism, and covers almost exactly the same years.

41/ I *continue* to believe gamers who want to frame games as art should be able to do so, though at a reasonable price—something similar to the $50 to $1,000 LEGO fans who want to buy independently designed military sets from Brickmania pay—and with full access to market data.

42/ I plan to continue occasionally collecting (but not selling) games, as I've been a collector my whole life and I think video games are the most important new art form of my lifetime.

But one thing I'll never lie down for is what appears to be (in the non-legal sense) a scam.

43/ Having said that, I suspect that what major-media journalists will start looking at in the months and years ahead is whether there is any scamming going on here *in the legal sense*.

Certainly, the documentary above (52 minutes long) would cause one some concern about this.

44/ Recently a third grading house, CGC, announced it will be creating a video game division. I saw some well-respected game-collecting YouTubers speculating that CGC may have tried to buy Wata but failed—and therefore was stuck building a new house from scratch. I'm not so sure.

45/ Based on what I've seen, I wonder if CGC just wanted a fresh start—offering the sort of transparency and ethical approach to a volatile, lucrative market that Wata Games initially promised when it started... before its CEO appeared on "Pawn Stars" to pump up graded games.

46/ I think a lot of powerful, rich men are being very incautious right now about business ethics and federal statutes—blinded by the amount of money they're making and the fact that they think their system will be populated exclusively by fawning game sellers/re-sellers forever.

47/ I'm probably one of the first *data journalists* in this space, and one of the earlier—but not the first—curatorial journalist. Coming after me are investigative journalists with experience investigating Wall Street and the sort of money behind them that only major media has.

48/ I'd think Wata would want to issue pop reports now. I'd think Wata would want to cease any involvement in anything that could be construed as market manipulation—including giving proprietary data to only some parties. I'd think they'd want to start answering emails and calls.

49/ But none of that's going to happen. I'm old enough to know that bad behavior doesn't stop on its own. The FBI has decided that bad behavior by Trump will stop on its own; Portland police has decided that bad behavior by the Proud Boys will stop on its own. They're both wrong.

50/ So as the video game collecting industry marches inexorably toward becoming a nine-figure market—a potential haven for collusion, money laundering, and fraud—I'll do my best to release cheap-as-hell hard data to earnest buyers. But this *will* blow up into a national scandal.

PS/ All this is the tip of the iceberg. I didn't even get into accusations relating to QA. Because graded games are slabbed in tamperproof plastic coffins, it's theoretically possible that an unsealed "CIB" game could have mint components swapped for other ones—the perfect crime.

PS2/ Indeed, the man I saw shut down by admins on FB was claiming he'd sent a mint game manual to be graded as part of a complete-in-box set and got back a slab that, when he cracked it open—for other reasons—contained a non-mint manual. I hope everyone gets the accusation there.

PS3/ What the gentleman was claiming—an accusation that remains unresolved post-suppression on FB—was that either a grading house misplaced a manual worth hundreds or thousands and tried to cover their error or a felony theft occurred that the criminal thought couldn't be caught.

PS4/ I have no info on this besides what this man said and detailed at great length (with evidence). But his allegations underscored (a) how much money is at stake here, (b) how this is the Wild West, (c) how opportunities for misbehavior are now almost ubiquitous in this market.

PS5/ Per this buyer, he couldn't get in touch with the grading house by phone or email, after numerous attempts. So he went to FB, where he was silenced by men who deal with the grading house as (effectively) a business associate. Presumably all he can do now is go to the police.

PS6/ My guess is that this was probably an honest mistake. But if a grading house won't answer calls or emails when it's dealing with literally *millions* in merchandise—even as its CEO is on Pawn Stars regularly—as a lawyer I know where that leads. And it's nowhere good. At all.

PS7/ In recent days I gushed to my wife, friends, even my mom about how fascinating the story is. While I got interested in collecting games recently—likely because it reminds me of my dad for some reason; he passed away in 2020—I'm now invested (no pun intended) as a journalist.

PS8/ I'm convinced we'll eventually see a Hollywood film about this, as well as several documentaries and books. I think at some point courts will get involved, though I don't know why, when, or regarding whom; it's just an instinct. This would even make an incredible TV series.

PS9/ So when I say America will hear a lot about this, I'm not saying more Americans will care than do now about what's already one of the largest entertainment industries in the world—bigger than film—but that, beyond an odd NYT piece, this story will break into popular culture.

PS10/ And the only way it won't is if everyone cleans up their act immediately, from the auction houses to the re-sellers to the grading houses to the social media group organizers. But as there's no more hope that'll happen here than with the Trumpists... well, expect fireworks.

NOTE/ The allegations made by the son of a former Heritage employee in the video above are, needless to say, just allegations. Halperin hasn't been found to have engaged in "shill bidding" and to my knowledge—excepting the lawsuit mentioned in the video—hasn't been accused of it.

NOTE2/ To me, this Los Angeles Times quote was one of the pinnacles of the great piece of curatorial journalism linked to in this thread (the 52-minute documentary on YouTube). If a market is defined by rarity and grading, and you suppress rarity data... the grading house is God.