A class action lawsuit filed in a U.S. District Court in California last week is challenging the practices of Ticketmaster and the National Collegiate Athletic Association (NCAA) that together use a lottery system to distribute tickets for some of the NCAA’s hottest events, such as the NCAA Men’s Basketball tournament.

The lawsuit alleges that the two organizations are violating racketeering laws because fans trying to purchase tickets to some events are forced to pay a nonrefundable fee just for the right to enter a lottery for tickets.

“Defendants’ scheme requires Plantiff and putative class members to purchase one or more entries for the chance to win the right to purchase tickets to a particular tournament game(s). This scheme satisfies all three elements of a lottery: (1) a prize, (2) an element of chance, and (3) consideration for the chance to win the prize. The consideration is the entry fee and the free use of applicants’ capital, and the prize is the right to purchase game tickets at face value. An element of chance exists because the winning entries are chosen by an (allegedly) random drawing, and not all entries can win,” the lawsuit states.

“Lotteries, however, are illegal, and are considered gambling under Indiana and California law unless run by the state or licensed charities,” it added. Ticketmaster is headquartered in California and the NCAA is headquartered in Indiana.

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According to the lawsuit, Ticketmaster requires fans pay a $10 service fee, in addition to money for the tickets they want to purchase, for early rounds of the NCAA Men’s Basketball tournament, for example. Not all fans will receive tickets, hence the lottery, but those who lose out will only be refunded for the tickets they tried to purchase, while Ticketmaster retains the service fee. For the Final Four, fans must pay a $6 for each attempt at tickets, but again they are not refunded that fee if they do not succeed.

For the 2008 Final Four, according to the lawsuit, Ticketmaster only made 4,600 tickets available through the lottery, but more than 100,000 people tried to obtain tickets.

Albert Lopez, a spokesperson for Ticketmaster, said the company is not commenting on the lawsuit. NCAA spokesperson Erik Christianson told ESPN that the organization believes the lawsuit has no merit. “There is no credible suggestion that our public ticket sale can be considered gambling in any way, and we are comfortable with our approach.”

“The lawsuit also claims that the NCAA and Ticketmaster profit from the interest earned by depositing the full ticket prices sent in by lottery participants and holding the losers’ money for months, well beyond the date of the alleged lottery,” according to a statement from Hagens Berman Sobol Shapiro LLP, the law firm that filed the case.

Sean Pate, spokesperson for Ticketmaster rival StubHub, told TicketNews that he believes the lawsuit grew out of fan frustration.

“This speaks to the frustration many fans encounter when trying to secure those coveted seats for events like the NCAA Tournament,” Pate said. “Whether a formal lottery system or an effective virtual one online, the difficulty in getting tickets to high profile events is what has driven the explosive adoption of secondary services like StubHub, where tickets are abundant and non-refundable deposits do not exist.”

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