No Prize, So No Lottery, Indiana Supreme Court Says About NCAA’s Ticket Distribution Plan

No Prize, So No Lottery, Indiana Supreme Court Says About NCAA’s Ticket Distribution Plan

Some of the issues that arise in the secondary market for event tickets – often referred to as scalping – can shed light on other types of secondary markets. MB900319842[1]

One high-profile case involving ticket sales has focused on a plan used by the National Collegiate Athletic Association to randomly allocate tickets to the men's basketball Final Four and other championship events.

The would-be class action plaintiffs alleged that the plan was an illegal lottery.  At the federal district court, they saw their case dismissed.  They appealed, and (as described in an earlier post here) the Seventh Circuit Court of Appeals first issued an opinion concluding that the plan was an illegal lottery and then later threw out that opinion and asked the Indiana Supreme Court to rule on the issue. 

The Indiana Supreme Court has now ruled, and the NCAA has must feel like it has won its own sort of prize, since Indiana's highest court has concluded that the plan was not an illegal lottery.

The case focused on an Indiana statute, Indiana Code section 35–45–5–3, which makes it a felony to conduct lotteries and provides that “[a] person who knowingly or intentionally . . .  conducts lotteries or policy or numbers games or sells chances therein . . . commits professional gambling, a Class D felony.”  The court pointed out that the statute does not define "lotteries" but looked to past judicial opinions to concluded that a lottery has three essential elements: (1) a prize; (2) chance; and (3) consideration.Indiana[1]

The Indiana Supreme Court noted that a "prize" is something of value that is more than the amount invested.  The court looked to the public policies behind the statute, and reviewed other cases involving allegations of illegal lotteries, and concluded that the NCAA's plan was not a lottery because it did not involve a "prize" under Indiana law:

In sum, it would stretch the definition of “lottery” beyond what the General Assembly intended to hold that the NCAA's ticket-distribution plan is a proscribed lottery under Indiana Code section 35–45–5–3.  The NCAA creates the primary market by issuing tickets in the first place, and it sets the price for these events many months in advance.  In setting the price, the NCAA reasonably calculates what the fair-market value at the time of the event will be. . . .  We note, however, that our holding would not prevent a prosecutor or plaintiff from attacking a similarly structured scheme that is merely a ruse for a traditional lottery.  Barring such a ruse, we conclude that where an event coordinator creates the primary market for event tickets, the fair-market value of the tickets is equal to their face value.  In this case, there was no “prize” and hence no “lottery” because at the time applicants submitted to the NCAA their offers to purchase tickets, the market value equaled the face value of the tickets.  Thus, as a matter of law, the NCAA's ticket-distribution plan is not a lottery.

The full opinion is available here from the Indiana Supreme Court's website.

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