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So my sons and I are having a debate about Karn, the Great Creator's ability to use a "card from outside the game" and its format. The way I interpret the text is that in a casual, non-tournament game, I can choose any artifact outside the game from my collection and put it in my hand. Does that chosen card have to be within the format we are playing? In other words, if I'm playing standard, does my "chosen card" have to be within the standard format or can it be from any set? And if so, can it be one that's on the banned play list?

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This really depends on what you mean by casual. Karn has a card specific ruling:

In a casual game, a card you choose from outside the game comes from your personal collection. In a tournament event, a card you choose from outside the game must come from your sideboard. You may look at your sideboard at any time.

But if you are playing a specific format, the banned card list for that format prevents the use of those cards in general. In tournament play, it is sufficient to ban them from main decks and sideboards. In casual, this should be extended to include cards pulled in from outside the game.

See Spike, Tournament Grinder as the exception that proves the rule. Spike is a joke card (not legal in any tournament formats) that lets you use cards that are banned in the current format. Normally you cannot do that when pulling in cards from outside the game.

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