The Supreme Court of Indiana, in a unanimous decision, has ruled in favor of the NCAA, dismissing a class action lawsuit challenging the NCAA’s Basketball Tournament ticket-distribution contest.(For background, we previously blogged about this case here and here). The Court determined that the NCAA contest, whereby the NCAA randomly allocated Final Four tickets to applicants who had offered to purchase tickets by submitting the face value of the tickets along with a non-refundable handling fee, was not an illegal lottery under Indiana law because no prize was awarded to those applicants who received the opportunity to purchase tickets.
In determining that the NCAA contest was legal, the Indiana Supreme Court made the following observations: (i) under Indiana law a lottery is defined as “a scheme for the distribution of prizes by lot or chance among those who provided or promised to provide consideration”; (ii) “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”; and (iii) the decision “would not prevent a prosecutor or plaintiff from attacking a similarly structured scheme that is merely a ruse for a traditional lottery.”
The Indiana Supreme Court’s decision follows the decision issued in October 2010 by the US Court of Appeals for the Seventh Circuit, in which the Court of Appeals reversed its earlier ruling that the lawsuit could proceed and certifying issues to the Indiana Supreme Court. In issuing that decision, the Court of Appeals noted that the question of whether the NCAA’s
“ticket-distribution system constitutes a lottery under Indiana law is a close one, and our holding could have far-reaching effects on sports-ticket distribution systems utilized by the NCAA and others. At this juncture, we believe that affording the Indiana Supreme Court the opportunity to interpret the application of the Indiana statutes involved here appears to be the most prudent course of action.”
Prior to its October 2010 decision, the Court of Appeals, in July 2010, had reversed the decision of Judge William T. Lawrence of the Southern District of Indiana dismissing the case — determining that the plaintiffs had sufficiently pled a cause of action for violation of Indiana’s illegal lottery law by claiming that the NCAA’s contest involved the distribution of a prize, by chance, among persons who were required to pay valuable consideration to enter.
The Indiana Supreme Court’s unanimous decision, in addition to upholding the NCAA’s ticket-distribution contest, could have far-reaching effects on sports ticket distribution schemes, as well as other non-sport related ticket-distribution contests involving the payment of indirect fees to enter.