Whatnot Faces Legal Challenges Over Card Breaking Practices
Editor’s note: this article was updated after publishing to include a comment from Whatnot. It was added in its entirety to the revised version.
The Hobby is facing a major test today as an arbitration complaint is filed against Whatnot, Inc. The document targets the $11 billion marketplace, specifically challenging the legality of the randomized breaks and repackaged products that have become central to Whatnot’s business model. This filing does not take aim at the entire breaking industry; instead, it focuses squarely on Whatnot’s specific practices and how they have allegedly harmed the hobby.
Paul Lesko, Attorney for The Plaintiff, said "Today we are announcing that we have filed 15 arbitrations over the last few days and will continue filing them for our clients (we currently have 15 more to go). Our cases focus on Whatnot allegedly running an illegal casino without the safeguards that regulated casinos are required to have to protect consumers. Due to those lack of safeguards, we believe consumers are at risk of unfair and fraudulent activities as well as addiction issues without the proper guardrails."
Lesko continued, "The reason we are now coming to the media is we believe Whatnot’s recent change to its terms of service for its arbitration clause negatively affects Whatnot consumers so we want those consumers to look at the new arbitration clause, note that there is an opt out period, and have time to decide if they want to opt out…even seeking another attorney’s advice on what to do."
A Marketplace or an "Unregulated Casino"?
At the heart of the filing is the claim that Whatnot’s version of breaking is actually a form of unregulated gambling. While many collectors enjoy the excitement of a live stream, the complaint argues that Whatnot’s setup functions more like an unlicensed lottery. By allowing users to pay for a "spot" and then using a random tool to decide who gets which team or player, the filing asserts that Whatnot is running a game of chance rather than a traditional retail business.
Whatnot uses the slogan "Shop, Sell, Connect" to describe its platform. However, the legal paperwork calls this a "false front." It alleges that the platform is designed to be "carnival-like," creating a high-pressure environment that pushes users to spend money quickly. The document points out a serious lack of safety tools, claiming that Whatnot operated for years without the spending limits or self-exclusion lists that actual casinos are required to provide to protect their customers.
Problems with Seller Oversight and Fraud
The complaint also raises major concerns about how Whatnot manages its sellers, especially those with "Premier Shop" status. These shops are supposed to be the best on the platform, but the filing alleges that Whatnot has allowed some of them to engage in unfair acts.
The most serious allegations include "shill bidding"—where fake bids can be used to raise up prices—and the use of "inside knowledge." Because many repacks on the platform are put together by individual sellers rather than card manufacturers, the seller knows exactly which box(es) may hold the most valuable "hits."
The complaint alleges that Whatnot’s oversight is so weak that some sellers have been able to "leak" the location of these top cards to favored buyers through private messages before a stream even starts. The filing suggests that Whatnot has historically prioritized platform growth over protecting the hobby, often failing to hand out permanent bans even when these issues come to light.
Policy Changes
Whatnot tried to update its rules, but the filing describes these changes as insufficient. In 2025, the platform added spending limits. However, the complaint claims they are "inadequate" because they are controlled by the user and can be easily turned off. This fails to provide a real safety net for those caught up in the excitement of a live auction.
The Negative Impact on the Hobby
For a hobby built on trust and shared excitement of a great pull, this legal complaint highlights a growing concern about Whatnot’s specific practices. The complaint suggests that Whatnot has created a system where gambling mechanics are more important than the actual collectibles.
The outcome of this case could force a major change in how Whatnot operates its live events. The focus is now on whether the platform will forced to move away from its controversial model and toward a more transparent and protected experience for everyone.
Response From Whatnot
In a statement Whatnot replied:
"We absolutely reject the characterization in this complaint. Gambling isn't allowed on Whatnot, and we strictly enforce this policy.
Whatnot is a commerce platform built to support small businesses, connecting them with buyers who purchase products they love. Card Breaks are a long-standing format in collecting — at card shops, conventions, and in communities that have thrived for generations. And while sellers who “break” only make up 4% 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."
Danny Black serves as the Editor of Collectibles on SI. Founder of Hobby News Daily, Danny also serves as a consultant to companies in The Hobby. A former employee of the Braves and Orioles, Danny is a Maryland resident with his wife and 3 children.
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