Fanatics Live is facing legal scrutiny over its trading-card break business after a California whistleblower lawsuit alleged that some randomised breaks offered through the platform amount to unlicensed lotteries.
The action, filed under the California False Claims Act in July 2025 and later unsealed, also targets rival livestream marketplace Whatnot. It alleges that the companies failed to obtain required gambling and business licences and did not pay taxes associated with activities the plaintiffs classify as illegal lotteries.
Fanatics has not publicly accepted that characterisation. The dispute comes despite Fanatics Live prohibiting a range of explicitly gambling-style mechanisms, including raffles, roulette wheels, spins and third-party randomised results.
Random team breaks come under scrutiny
Card breaks allow customers to share the cost of sealed boxes or cases of collectible cards that are opened during livestreams. Depending on the format, buyers receive cards associated with particular teams, players or assigned positions.
Fanatics Live’s own guide explains that in a random team break, participants pay for spots before teams are allocated randomly. Because customers have the same chance of receiving more desirable teams, the spots generally carry an equal price.
That element of random allocation is central to the legal challenge.
The California case includes 18 named plaintiffs from at least 11 states, according to reporting cited by Gambling Insider. Individual spending on card breaks allegedly ranged from several hundred dollars to more than $4 million. The plaintiffs are also seeking an order preventing Fanatics from supplying products to breaking businesses they describe as unlicensed operations in California.
California’s Department of Justice declined to intervene in the whistleblower action. Gambling Insider said it had been unable to establish whether the plaintiffs subsequently chose to continue pursuing the case independently. No court ruling has established that Fanatics Live’s card breaks constitute illegal gambling.
Legal scrutiny is not limited to the whistleblower case. Womble Bond Dickinson said trading-card repacks and breaks increasingly face questions under state lottery, gambling and consumer-protection laws. A traditional lottery analysis generally examines whether an activity combines payment, chance and a prize of value. However, the legal position can be complicated when every customer receives tangible goods.
California also has specific legislation covering certain sports trading-card “grab bag” products containing cards removed from their manufacturer’s original packaging. The law firm’s analysis notes that this provision is particularly relevant to repacks, while randomised box breaks can raise separate questions under broader lottery rules.
Fanatics expands its collectibles and gaming ecosystem
The dispute is notable because Fanatics operates across several parts of the sports collectibles market. The company owns Topps, operates Fanatics Live and sells other products involving unknown or randomised contents.
Its livestream platform says sellers are vetted and provides several types of breaks, including pick-your-team, random-team, division, player and personal breaks, as well as repacks.
Fanatics has also increasingly connected its gaming and collectibles businesses. In September 2026, it launched the unified Fanatics Sports & Casino app, combining Fanatics Sportsbook, Fanatics Casino and Fanatics Markets. Customers can earn FanCash through betting, trading and casino activity and redeem it across the wider Fanatics ecosystem, including for collectibles such as signed rookie cards.
The sportsbook currently operates in 23 US states and Washington DC, while Fanatics Casino is available in New Jersey, Pennsylvania, Michigan and West Virginia.
The card-break dispute therefore arrives as Fanatics continues integrating sports betting, prediction markets, merchandise and collectibles within a single loyalty system.
For now, randomised card breaks remain available through Fanatics Live, and there has been no reported judicial finding that the format constitutes unlawful gambling. The continuing litigation and arbitration activity around the wider card-breaking industry, however, is increasing scrutiny of how platforms structure random allocation, disclose product values and separate collectible sales from activities governed by lottery laws.