Pokémon GO, the augmented reality game that allowed people to catch various Pokémon in the real world with with their mobile devices (and caused millions of people to flood the streets on its initial release), celebrated its 10th anniversary.
On July 9, 2026, Pokémon GO hosted an invitation-only event at Times Square. Approximately 2,000 attendees, including local game event organizers (known as community ambassadors), their friends, media, and content creators participated in a massive group raid against the legendary Pokémon Mewtwo, recreating the game’s initial trailer. After the raid, the participants captured a special edition Mewtwo with the background of Times Square and perfect battle attributes or stats.
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This free special reward for a predetermined group of people was not received well by the broader player base. The odds of obtaining a Pokémon with perfect stats in a regular group raid is 1 in 216. Many players have spent significant money on raid passes chasing perfect stats or the similarly rare “shiny” variants for many of them.
Some of these lucky attendees tried to sell their special Mewtwos for thousands of dollars online even though this violates the game’s terms of service and can result in the player’s account being banned permanently. These buyers are most likely completionist collectors.
But if they sell their special Mewtwos for real money, it also comes with real tax consequences. For the sake of simplicity, let’s assume everyone has no expenses related to catching the Mewtwo.
The first thing to think about is the person’s full-time job or lack of it. As mentioned earlier, media, content creators, local community ambassadors, and their friends attended the event.
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Let’s first consider the friends and the media attendees. If these people play Pokémon GO for fun and sold the Mewtwo as a one-off transaction, the Mewtwo would be considered a capital asset and any profit from the sale would be taxed as a capital gain. If they sold it less than one year after obtaining it, it would be taxed at short-term capital gains rates which is the same as ordinary income rates. But if they hold it for longer than one year, the gain will be taxed at the lower long-term capital gains rates. One benefit to capital gains treatment is that they are usually exempt from self-employment taxes which is an additional 15.3% up to the 2026 social security maximum wage base of $176,000.
Next, let’s consider the community ambassadors and content creators, both of whom spend more time playing the game. Community ambassadors, while they get some in-game perks, are unpaid volunteers. They are also unlikely to sell for real money or risk losing their ambassador status or even get their accounts banned from the game. Since these people are not getting paid for playing Pokémon GO, the money they get from selling their Mewtwo is likely to be given capital gain treatment as well.
Lastly, the content creators who were invited to the event are well-known in the community with thousands or even over a million subscribers. Chances are good that they are doing this full time. These people receive a portion of advertising revenue from their streaming platforms, subscription revenue, or from sponsors who are highlighted during their livestreams.
How content creators are taxed on the gain from the Mewtwo sale is murky. On one hand, it can be argued that since obtaining the Mewtwo is connected to their full-time business activity of livestreaming, the sale should be considered ordinary business income and be subject to both ordinary income tax rates and the self-employment tax.
On the other hand, a good argument can be made that the Mewtwo is a capital asset even for content creators. Even though content creators make their money solely from playing Pokémon GO, they are not buying and selling digital Pokémon regularly and continuously. In other words, their Pokémon are not business inventory. They are more like business assets, like Jimi Hendrix’s guitars or Jay Leno’s car collection.
If the end buyer is a collector, it does not turn the Mewtwo into a collectible taxed at a flat 28% rate on the profit. For federal tax purposes, a collectible is statutorily defined as any work of art, rug, antique, metal, gem, stamp, coin, alcoholic beverage, musical instrument, or any other tangible personal property specified by the Treasury secretary. Since Mewtwo in Pokémon GO is virtual and not tangible, the collectible rule will not apply. If there is a tangible Mewtwo in the real world, taxes would be the last thing people would be worried about.
While the exclusive Mewtwo event sparked significant backlash, it provides an interesting real-world example of the tax differences between ordinary income and capital gains treatment.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.