As a result of the overwhelming popularity of NCAA championship events (primarily the Division I Men’s Basketball Tournament), the NCAA created a ticketing system to distribute tickets to these events.  The NCAA sets the face value of the tickets to its events several months prior to the event.  Prospective ticket purchasers submit to the NCAA an application offering to purchase tickets for a particular event.  Each applicant may submit only one application, but, for some of the events, an applicant can submit multiple offers on a single application, though only one offer can be accepted.  When submitting an application, the applicant must submit the face value of the tickets along with a nonrefundable handling or service fee ($6.00) for each offer.  When demand for the tickets exceeds supply, the NCAA uses a random-selection program to accept offers from the pool of offers.  Applicants whose offers are accepted receive event tickets via overnight delivery.  Applicants whose offers are rejected receive refunds of the ticket price, but do not receive a refund of the handling fee.

The plaintiffs in George v. NCAA submitted offers to the NCAA to purchase tickets for the 2009 Division I Men’s Basketball Tournament, but their offers were not accepted.  They submitted their applications knowing both the handling fee was nonrefundable and there was a possibility demand would exceed supply and the random-selection process would be utilized.  Ultimately, the plaintiffs were dissatisfied with not being able to purchase the tickets requested and, thus, filed suit in federal court claiming the NCAA’s ticket distribution system constitutes an unlawful lottery under Indiana law.

This matter was presented to the Supreme Court of Indiana by and through certified questions from the United States Court of Appeals for the Seventh Circuit (“Seventh Circuit”).  The pertinent certified question before the court was: Do the plaintiffs’ allegations about the NCAA’s method for allocating scarce tickets for championship tournaments describe a lottery that would be unlawful under Indiana law?

Under Indiana law, a lottery is defined as “a scheme for the distribution of prizes by lot or chance, especially a scheme by which one or more prizes are distributed by chance among persons who have paid or promised a consideration for a chance to win them.”  As such, the three essential elements to a lottery are 1) a prize, 2) chance, and 3) consideration.  The NCAA focused its arguments on the “prize” element.  The Court analogized the present case with Lesher v. Baltimore Football Club and provided a definition of “prize” as “something of more value than the amount invested.”  In Lesher v. Baltimore Football Club the court held “since the price paid equals the market value, those receiving tickets got nothing of greater value than those who received refunds.”

Plaintiffs argued that because the handling fee is forfeited regardless of the outcome, those receiving tickets receive something of greater value than those who lost the handling fee and were not permitted to purchase tickets.  The Court failed to follow the plaintiffs’ argument and stated “the fact that the [handling] fee is nonrefundable means that both groups receive the same amount after the blind draw.  Those applicants whose offers to purchase tickets are accepted receive tickets for $150 per ticket, whereas those applicants whose offers are rejected receive $150 in cash per ticket.”  Additionally, the court stated “the plaintiffs have not alleged that their nonrefundable handling fees go toward providing extra benefits to successful applicants.”  As a result, the Court concluded it would be a stretch to find the NCAA’s ticket distribution system constitutes a lottery under Indiana law, thus, as a matter of law, the NCAA’s ticket distribution system is not a lottery.  In all likelihood, the Seventh Circuit will dismiss the case pending before it in light of the Supreme Court of Indiana’s opinion.

For any questions, feel free to contact Christian Dennie at cdennie@bgsfirm.com.