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NCAA championship ticket distribution not a lottery

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The National Collegiate Athletic Association’s ticket-distribution plan for championship games doesn’t constitute a “lottery” under Indiana law, the Indiana Supreme Court decided Thursday. The issue was before the justices as certified questions from the 7th Circuit Court of Appeals.

Tom George and others who were unsuccessful in purchasing tickets to the 2009 Division I Men’s Final Four basketball tournament sued the NCAA. George and others had submitted offers to the NCAA to purchase tickets, which included $300 for a pair of tickets and a nonrefundable handling fee of $6 per ticket. Up to 10 offers could be submitted, but only the purchase price of the tickets would be refunded if buyers weren’t chosen. Demand far outweighed supply.

The plaintiffs argued this system constitutes a lottery under Indiana law. U.S. District Judge William Lawrence of the Southern District of Indiana dismissed the suit, but the 7th Circuit Court of Appeals reversed. Later, the same panel of 7th Circuit judges vacated its prior decision and asked the Indiana justices to consider three certified questions. The only question relevant to Thursday’s decision is whether the NCAA’s method of allocating tickets is considered a lottery under state law.

In Tom George, et al. v. National Collegiate Athletic Association, No. 94S00-1010-CQ-544, the justices noted the statute in question – Indiana Code 35-45-5-3 – doesn’t define “lottery,” so they relied on the definition explained in Tinder v. Music Operating Inc., 237 Ind. 33, 142 N.E.2d 610, 614 (1957), and decided that the term means “a scheme for the distribution of prizes by lot or chance among those who provided or promised to provide consideration.”

Writing for the unanimous court, Justice Frank Sullivan cited Lesher v. Baltimore Football Club, 496 N.E.2d 785 (Ind. Ct. App. 1986), in which a similar system was used to allocate tickets to Indianapolis Colts football games once the team relocated from Baltimore. In that case, however, the handling fees were returned if applicants didn’t receive tickets. The state Supreme Court had summarily affirmed the lower court that the ticket-distribution process wasn’t a lottery.

“In cases like this and Lesher, the critical fact is that no market for tickets exists until the event coordinator issues the tickets in the first place, so, as a matter of law, the face value of the tickets equals the fair-market value of the tickets on the primary market,” wrote Justice Sullivan. “The speculative nature of the secondary market makes it an inappropriate consideration in determining the presence of a prize in this case.”

They held it would stretch the definition of “lottery” beyond what the General Assembly intended if the court held that the athletic association’s ticket-distribution plan is a proscribed lottery under I.C. 35-45-5-3.

“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,” wrote the justice.

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