Major League Baseball and the National Collegiate Athletic Association: Private Lotteries and Enforceable Contracts

Major League Baseball and the National Collegiate Athletic Association: Private Lotteries and Enforceable Contracts

Charles S. Michels · 14 Vand. J. Ent. & Tech. L. 395

Abstract

This Note argues that both the National Collegiate Athletic Association (NCAA) and Major League Baseball (MLB) have run or continue to run contests for playoff tickets that constitute lotteries under state law. For a contest to be considered a lottery in New York and Indiana, there must be a prize, consideration, and chance. Both of these schemes meet these three requirements, because entrants pay a non-refundable fee for a chance to purchase a playoff ticket to games at a time when the face value of the ticket will likely be much lower than the market value of the ticket.

However, in George v. NCAA, the Indiana Supreme Court ruled that the NCAA ticket contest did not constitute a lottery because there was no prize involved. The court found that where the creator of the event determines the face value of the ticket, the market value of the ticket would be the stated face value at the time of the contest. The court cited no economic theory or precedent for this holding, and it goes against what courts have held in other contexts where the face value of the item in question does not equal the market value of the item in question. This ruling vacated the Seventh Circuit opinion, which had held that since the market value of the ticket was higher than the face value of the ticket that there was a prize involved.

In the future, courts should follow the analysis proposed in the Seventh Circuit’s vacated NCAA v. George opinion rather than the analysis used by the Indiana Supreme Court. Courts should view both the NCAA and MLB ticket contests, and other similar schemes sure to arise in the future, as illegal lotteries run in violation of the organizations’ respective state laws. By doing so, courts will protect uninformed contestants and slow the proliferation of these types of contests. An organization may continue to hold similar contests in the future, but if an organization chooses to do so, it must return the consideration the contestants paid to enter the contest to those contestants who do not win the prize. When the organization returns the consideration, the organization will not be conducting an illegal lottery because there cannot be a lottery without prize, chance, and consideration. Returning the consideration allows the winner to purchase tickets at a price that he believes is fair at the time he enters the contest and returns the loser to the same position that he was in when he entered into the contest.