In 2014, a New York City taxi medallion — a metal plate authorizing the operation of a single yellow cab — sold at auction for $1.32 million. It was considered a safe investment. Medallion prices had risen steadily for decades, backed by the city's strict limit on licensed taxis and the certain demand for rides in a city of 8 million people. Banks lent against medallions. Immigrant families invested their life savings in them. Pension funds held medallion debt.

By 2022, the same medallion sold for under $175,000. An 87% decline in eight years. The city had not issued more medallions. The regulatory scarcity that gave medallions their value had not changed. What changed was that Uber, Lyft, and rideshare platforms made the medallion irrelevant to the majority of riders who wanted a car. The scarcity remained. The necessity of the scarce thing evaporated.

The taxi medallion collapse is the most instructive cautionary tale in the history of regulated scarcity assets — and it has direct implications for the tokenization of the dozens of other regulated-scarcity instruments that are currently valued on the same premise.

What Makes a Regulated Scarcity Asset

Regulated scarcity assets get their value from government-controlled supply limitations. The government decides how many can exist, and the artificially limited supply creates value for existing holders. The category is larger than most people realize:

  • Taxi medallions: NYC, Chicago, Boston — collapsed as Uber scaled
  • Liquor licenses: State-controlled supply; some worth $500,000+ in competitive markets
  • Broadcast spectrum: FCC-licensed; worth billions in aggregate; increasingly threatened by streaming
  • Airport landing slots: FAA-controlled at congested airports; JFK slots traded for $75 million each
  • Fishing quotas: Government-allocated catch rights; tradeable in most major fishing nations
  • Water rights: State-allocated appropriations in the western US; increasingly valuable and contested
  • Cannabis licenses: State-limited; value has collapsed in oversupplied markets as legalization spreads

What Tokenization Does to Regulated Scarcity

Blockchain tokenization has two distinct effects on regulated scarcity assets, and they point in opposite directions.

The positive effect: liquidity. Most regulated scarcity assets are extremely illiquid. A liquor license in a competitive market might be worth $200,000-$500,000, but selling it requires finding a buyer, navigating transfer approval from the regulatory authority, and waiting weeks to months for the transaction to close. Tokenization of a liquor license interest — where fractional ownership of the revenue stream is represented as on-chain tokens — could create a secondary market with price discovery and faster settlement. The same applies to water rights, fishing quotas, and airport slots: all are tradeable in principle but illiquid in practice because the market infrastructure for them is thin.

The negative effect: the Uber problem. Tokenizing a regulated scarcity asset does not protect its value against technological or regulatory disruption of the underlying need. A tokenized taxi medallion in 2014 would have been easier to buy, sell, and use as collateral — and it would have lost 87% of its value by 2022 regardless of whether it was on a blockchain. The token is a better representation of the asset. It is not insurance against the asset becoming obsolete.

The Due Diligence Question

For investors evaluating tokenized regulated-scarcity assets, the taxi medallion lesson suggests a specific due diligence question: what is the technology or regulatory scenario that makes the scarcity irrelevant? For airport landing slots, the scenario is suppressed air travel demand, remote work reducing business travel, or a future supersonic point-to-point aviation that doesn't use congested hubs. For water rights in the western US, the scenario is desalination at scale. For broadcast spectrum, it is already unfolding in real time as streaming displaces broadcast audiences.

The regulated scarcity is real. The question is whether the thing being scarce remains necessary. Tokenization makes the asset more accessible and more liquid. It does not answer the necessity question — and for regulated-scarcity RWAs, that is the question that determines whether the investment thesis holds.

→ Water rights — the most contested regulated scarcity in the American West
→ How to evaluate an RWA project — the full framework
→ Airline miles — another regulated-scarcity asset with an Uber problem