by Charles Kaplan, R-2558
Charles Kaplan on Chipping, February, 2001
Why the Chip Hobby Does NOT Need Slabbed Chips
In the coin hobby, slabbing is very popular among dealers and collectors. Yet the concept of slabbing casino chips has been met with vehement opposition. Why is that?
Here is a brief explanation of slabbing, for those who are not familiar with the term. A coin is submitted to a company that provides a slabbing service. The coin is then individually reviewed by several experts who each render an opinion on the coin's authenticity and grade. A final grader assigns the grade based on the committee's opinions. The coin is then placed in a tamper-proof inert plastic container, which is also known as a slab. The intent is to guarantee that the coin inside the slab is genuine, original and in the condition indicated by the grade. While not all coin collectors and dealers like slabbed coins, slabbing does provide certain benefits:
- Grading - there are several contending standards for grading coins; there is no universally accepted standard. Some dealers routinely over grade their coins. As long as they accept returns, this practice is OK with the ANA. The ANA is the American Numismatic Association, the equivalent of the CC>CC in the coin hobby. What sounds like a deplorable practice is tolerated because grading is subjective, it is an opinion, it is not the result of a scientific process. There has to be some leeway between the opinions of different individuals and this leaves room for the less honest dealers to take advantage of less knowledgeable collectors. There are so many different grades that are assigned to coins, there could be as many as 70, that you need to be an expert in order to accurately grade coins. Collectors are generally not expert enough to detect the minor differences that will determine the grade of a coin. Since you cannot always rely on dealers to grade accurately, having an independent organization grading coins makes sense, especially when a difference in one grade to the next could mean the coin is worth $1,000 or even $10,000 or more in some cases.
- Authentication - coin "doctors" can counterfeit or alter a coin to make it appear to be a rarer variety, year, mintage or a better grade. Counterfeit and altered coins are major problem in the coin hobby. In fact, the Numismatists, the monthly publication of the ANA, has (or use to have) an article in each issue listing newly discovered counterfeit coins. Experts at the grading services are able to detect counterfeits and alterations. Coins that are encapsulated are guaranteed by the grading services to be authentic. Coins cannot be cleaned without causing some damage to the coin, although its appearance to the naked eye may substantially improve. Cleaning a coin greatly reduces its value. Some coin "doctors" can clean a coin so expertly, that only an expert with the proper equipment can detect the cleaning. Most grading services will not encapsulate a cleaned coin.
- Protection - coins are subject to deterioration from the elements. Once encapsulated in an inert container, a slab, a coin is no longer exposed to harmful chemicals in the atmosphere that can damage the surface of the coin. A slabbed coin is also protected from fingerprints and most other types of physical damage.
In the coin hobby grading, authentication and protection are very real needs to collectors. Slabbing allows a collector to buy a coin that is authentic, properly graded (within a limited range) that also comes with its own protection. I would say that virtually every coin collector has at one time or another owned an over graded, counterfeit, altered or cleaned coin without their knowing about it. I know that I have, many times. If I still collected coins, I would not buy an expensive coin, which was not slabbed. The slabbing is a form of insurance. A new collector with limited knowledge of the hobby can confidently build a collection or rare coins, if they are slabbed. In the coin hobby, slabbing provides a service that was eagerly sought by collectors because of the abuses they suffered from disreputable dealers.
If slabbing coins is so beneficial to the hobby, why then do collectors oppose the slabbing of casino chips?
Simply stated, the coin and chip collecting hobbies are different. The biggest difference is that chip dealers are honest. In the hundreds or perhaps thousands of chip transactions I have been involved in, I have not felt that I have been taken advantage of even once. The only exception I would make is that sometimes a previously rare chip has been found in some quantity. There is a problem that some dealers are not forthcoming about the new discovery and continue to sell the once rare chips at what are now inflated prices. In this case, slabbing would not provide any benefit in this situation.
Grading, authentication and protection are not anywhere as important to chip collectors are they are to coin collectors:
- Grading: Chip grading is relatively simple. Although there is not a universally accepted grading standard for casino chips, one is not really needed because most of us accept the five levels of grades that are commonly used: new, slightly used, used, worn and damaged. The grades are intuitive and easily recognized, even by newcomers to the hobby. A grading service would not provide any value add to the chip collecting hobby.
- Authentication: I only know of one chip that was counterfeited, a $25 chip from the Fremont casino in Las Vegas. When this counterfeit was discovered, the dealer who was selling the chips (who was not the counterfeiter) did the right thing and offered refunds immediately. If counterfeiting becomes more of an issue in the future, collectors will need some way to better authenticate casino chips. Unlike coins, casino chips are made to take a lot of abuse and can be easily cleaned to remove dirt without damaging the chip. A casino chip that has been properly cleaned is likely to be more desirable to collectors and worth more than when it was dirty. Counterfeiting and alterations are not a problem for casino chip collectors and slabbing services again will not be providing an value add in this area.
- Protection: Casino chips, for the most part, are very sturdy and are not subject to any kind of decay from the elements. I have seen a few casino chips that have been discolored from exposure to sunlight or fluorescent light and collectors should take care to avoid this. Collectors put their chips into some kind of holder, but do so as a way to store and show off their chips, not really as a way to protect them. One thing to think about, chip collections take up a lot of room now, casino chips in slabs will take up several times as much room. Chip collectors will not want to encase their chips in slabs as a means of protection.
Slabs allow viewing both sides of a chip or coin. In reality chips have a third side, the edge. On some chips, the edge may have valuable information for the collector. The easiest way for a collector to assess wear on a chip is by looking at its edge. This is usually where wear occurs first in the form of small nicks. The edge markings, especially on newer chip designs from manufacturers like Chipco and Bud Jones are used in identifying chips. When in a slab you will not be able to fully see the edge of a chip.
There are other problems and abuses that occur with slabbing, which I will not go into in any detail. Suffice it to say that even if these abuses did not occur, there still would not be any need for slabbing chips for the reasons I've outlined above. As an example of one of the many abuses, the slabbing companies grade the most common, currently minted coins that are in excellent condition. In the coin hobby, a perfect coin has a grade of MS-70; near perfect would be MS-68 or MS-69. Coins in these lofty grades are sold for outrageous amounts of money to less knowledgeable collectors. Can you image spending $50 for a quarter that was minted in the last year that has a mintage of say 1,000,000,000? Would you be willing to spend $50 for a Four Queens $1 chip that was issued this year, but is fresh from the cage and slabbed? It sounds ridiculous and it is. If you cracked that quarter of the slab, do you know how much it would be worth? Exactly 25 cents. Slabbing has created an artificial market that is bound to crash at some point.
Slabbing has no place in the chip collecting hobby. We do not need slabbing for its intended purposes, grading, authentication and protection, and we certainly do not need the abuses that will come along with it.