Running head: RETHINKING TICKET RESALE 1

Rethinking Ticket Resale: A Legal Analysis of Ticket Scalping

Jasmine C. Geonzon

First Colonial High School

Legal Studies Academy

RETHINKING TICKET RESALE 2

Abstract

This paper is a legal analysis of the secondary ticket sale market throughout time, with a

specific focus on the use of automated bots used by scalpers to purchase large quantities of

tickets in small periods of time. The author investigates the secondary ticket industry as a whole

beginning from how ticket scalpers are able to acquire tickets to resell in the first place and

wrapping up with how ticket scalping has adverse effects on both consumers and event sponsors

and promoters. Laws between different states of the U.S. are also analyzed and compared in

effectiveness, more specifically that of the Virginia State Code and the New York Arts and

Cultural Affair Law. The author concludes by discussing possible solutions and alternatives to

alleviate the issue of ticket scalping and subsequent price gouging.

Keywords: ticket scalping, bots,ticket resale, price gouging

* This paper cites New York Assistant Attorney General, Jordan Adler, as a source. It is

important to note that the information and opinions attributed to Mr. Adler are his own and do

not reflect that of the Office of the New York Attorney General.
RETHINKING TICKET RESALE 3

Rethinking Ticket Resale: An Analysis of Ticket Scalping

Events as vast as large-scale music festivals and as personal as college graduation

ceremonies have all been susceptible to same economic anomaly: ticket scalping. Ticket scalping

can be defined as the purchasing of tickets in bulk at initial sale in order to be later sold at a price

other than the original, typically much higher (Bell, 2006). An unfortunate result of the supply-

and-demand based market, ticket scalping takes advantage of the strategically low-set initial

prices for events, only to resell them later for tens to hundreds of dollars more than the original.

Scalpers hurt both fans and promoters. Fans are put at an automatic disadvantage against the

capabilities of bots as well as widespread inflation of ticket prices, while promoters are hurt by

underground secondary market as they cannot reap the benefits of price increases despite pouring

thousands of dollars into the planning of the event (Halberg, 2010). To solely blame the

capitalist, free enterprise economic system is to completely ignore the unfair advantage that

ticket scalpers hold by employing automated bots to have the ability to sell out entire stadiums in

minutes (Hyman, 2016).

Over time, ticket scalped has adapted to changes in technology, moving from selling on

the streets to selling on online marketplaces, following wherever the demand for tickets was

highest. For high-demand concerts, its not uncommon for tickets to sell out minutes after going

on sale, only for hundreds of the same seats to appear on resale websites hours later for up to

hundreds, and even thousands, of their face value. Due to the threatening power of automated

ticket bots, real fans can often be discouraged from attending concerts and other

entertainments events and simply give up on trying to purchase tickets. Fans who do choose to

purchase tickets from the secondary market do so at the risk of buying counterfeit tickets or
RETHINKING TICKET RESALE 4

receiving seats different from what the seller had promised. Scalpers often advertise and sell

speculative tickets that they hope to buy in the future despite not being in their possession at the

time (Schneiderman, 2016).

While many U.S. states have enacted laws against scalping, it still occurs on an everyday

basis through websites such as Stubhub.com and Vividseats.com, forcing those who couldnt buy

a ticket at the initial sale to pay egregiously inflated prices. At an estimated $5 billion dollar

market size, the secondary ticket market continues to thrive in spite of attempts of legislative

regulation, growing an average 12% in size each year (Schroeder, Fisher, Orbe, & Bush, 2012).

Because of the use of ticket bots, the intended audience for ticketed events are often put at a

significant disadvantage in terms of accessing tickets as soon as theyre available as well as

paying a fair price for tickets through the secondary market.

History of Ticket Scalping

Street scalping.

Prior to the age of the internet, ticket scalping could most easily imagined by someone

selling tickets out of their coat pocket just outside the events venue. Both buying and selling

tickets, scalpers are identifiable by their systematic roaming in the search of potential customers

(Highfield, 2010). Before the age of the internet, ticket scalpers would hire individuals known as

diggers or droids to purchase tickets by either standing in line at box offices or purchase

tickets over the phone (Happel & Jennings, 1995). Some ticket brokers, or licensed ticket

resellers, have been found to have bribed box office officials in order to get their hands on as

many most desirable tickets as possible (Gibbs, 2000).

Though ticket scalping has always remained a prevalent practice, experts were still

unaware of the exact extent of the issue prior to the internet. This is because that before the rise
RETHINKING TICKET RESALE 5

of ticket resale online, many of transactions consisted of unregulated, under-the-table

transactions. Because the issue at hand is so broad, involving both large corporate agencies and

unscrupulous individuals, it can be hard to narrow down the extent of the problem (Staff

Member, 1992). The practice of street scalping has also died down due to legislation targeting

these vendors for serving as a public nuisance (Gibbs, 2000).

Online resale revolution.

The dawn of the internet has revolutionized many aspects of everyday life for anyone

with a computer and web capabilities. Business, especially, has been completely reshaped by this

new era of globalization through the internet, even illegal and historically under-the-table

industries. Self-made entrepreneurs had adopted the accessibility of the internet to reach larger

markets (Gibbs, 2000).The connectivity of the internet has been capitalized on by ticket scalpers

who have began using automated software knowns as bots to purchase tickets in bulk. A ticket

bot is a type of computer software allowing ticket scalpers to purchase thousands of tickets in

seconds by automating the ticket-buying process (Senator Charles Schumer, 2016). In order to

function properly, Bots must be able to: 1)constantly monitor when ticket sales begin; 2) search

and reserve tickets up for sale; 3) automate the process of ticket buying by utilizing a plethora of

stolen or invented purchaser information such as names, addresses, and credit card

information; and 4) bypass security measures, such as CAPTCHA, typically found on popular

ticket-selling platforms (Schneiderman, 2016).

Many authorized ticket sellers, most prominently Ticketmaster and Live Nation, have

taken measures on their part in attempts to reduce the amount of tickets purchased by bots,

adopting security measures such as instilling individual purchase caps and integrating

authentication tests, most notably CAPTCHA. However, most bots are specifically trained to
RETHINKING TICKET RESALE 6

bypass those measures and come out with hundreds, or thousands, of tickets for their operators to

later sell on the secondary market. Evading a 4 tickets per person ticket purchase limit, 1,012

tickets for a Madison Square Garden show were purchased by a lone broker using automated

ticket-purchasing software (Schneiderman, 2016). Ticketmaster itself has acknowledged that

more than 60% of the tickets bought for its most popular shows were bought with bots (Sisario,

2013). The ticket sale giant has come under fire for their tolerance of scalping bots for hiring a

ticket bot specialist, John Carahan, to oversee the relationship between Ticketmaster and ticket

scalping. However, since then, little progress has been made to strengthen their security system,

only taking action to slow down bots from purchasing tickets instead of adequately updating

their technology (Merchant, 2013).

Unfortunately, bots easily find their way into the hands of scheming scalpers by being

both low in cost and widely available. Scalpers are able to collect fake names and credit card

information in order to appear to the authorized ticket seller as different people, successfully

circumventing ticket purchase limits, usually four per person (Schneiderman, 2016). Answer

keys to many CAPTCHA tests are available for purchase online, for as little as less than $14.00

for 10,000 test keys (Sisario, 2013). The same issue of estimating the extent of ticket scalping

has only become harder with the new age of automated bots. Without a single storefront to count

from and the hundreds of ticket offers overlapping on various resale sites throughout the web, the

exact size of issue remains unknown (Fehr, 2016).

Legalized ticket resale.

Not all ticket resale should be classified as ticket scalping. For some industries, ticket

resale is necessary to conduct business. Exceptions do exist to help allow authorized groups or
RETHINKING TICKET RESALE 7

persons to resell tickets helping establish what is and what isnt legal. Exempted industries

include authorized ticket agents, ticket brokers, and travel agents.

Authorized ticket agents (Ticketmaster, Ticketron, Advantix) are the most easily

recognizable. These resellers hold a contract with the concert sponsor/promoters. The authorized

companies make money by receiving a percentage of the ticket sale directly from the promoter

and/or adding a service fee to the final price of the ticket (with prior permission from the

promoter).

Ticket brokers are after-market ticket resellers who obtain tickets from authorized sources

and make a profit by charging a price over the face value of the ticket. For the most part, they are

required to be licensed in states in which they do business.

Travel agents exemptions are applied in hopes to promote tourism in the surrounding

area. Restrictions for ticket agents include tickets may only be sold over face value if they are

apart of a package deal, including other items such as travel or accommodations, as well as lone

tickets may not be sold above face value (Gibbs, 2000).

Legislation

Understandably, ticket scalping has been on the backburner for many states legislatures.

Many of the current standing U.S. state laws in effect regarding ticket scalping still revolve

around the more outdated aspects of the ticket scalping process, prohibiting acts such as scalping

on public property or in close proximity to an event venue, selling tickets above face value, and

requiring a license for persons to legally eligible to resell tickets (Happel & Jennings, 1995).

This can be seen through Arizonas ongoing law making it illegal for individuals to sell tickets to

an event above face value within 200 feet of the venue (Ariz. Rev. Stat. 13-3718). These laws

may sound good on paper, however, insignificant punishments such as fines, short jail sentences,
RETHINKING TICKET RESALE 8

and ticket confiscation do little to nothing to deter scalpers to continue their practices at other

times and/or other locations (Happel & Jennings, 1995).

Only 34 out of 50 states have any laws regarding the act of ticket resale, many of which

fail to address online scalping and use of automated bots to purchase tickets (Schroeder et. al,

2012).

State Law

Virginia Code. Virginia law dictates:

Any locality may provide, by ordinance, that it is unlawful for any person, firm or

corporation to resell for profit any ticket for admission to any sporting event,

theatrical production, lecture, motion picture or any other event open to the public

for which tickets are ordinarily sold, except in the case of religious, charitable, or

educational organizations where all or a portion of the admission price reverts to

the sponsoring group and the resale for profit of such ticket is authorized by the

sponsor of the event and the manager or owner of the facility in which the event is

being held ( Va. Code 15.2-969).

In the Commonwealth, ticket scalping according to the preceding criteria is only

classified as a class 3 misdemeanor. Like many states, Virginia fails to account for ticket resale

taking place over the internet. The code explicitly states that the piece of code is not applicable to

tickets that have been resold on the internet (Richmond Sunlight, n.d.).

In February of 2009, a bill was introduced to the Virginia General Assembly that

revolving around the resale of tickets online. This bill took away jurisdiction over tickets being

resold on the internet away from local authorities and establishing the legal definitions of

language used in the Computer Crimes Act and the Uniform Trade Secrets Act. The Virginia
RETHINKING TICKET RESALE 9

House of Delegates and the Virginia State Senate both approved the bill, later signed by former

Governor Tim Kaine. However, for unknown reasons, the bill was never formally enacted,

failing to be apart of the official state code.

New York Law. Prior to 2007, New York state believed that the best way to address the

issue of ticket scalping was to enforce anti-scalping laws, beginning with state-level regulation

of sales and evolving to creating price caps based on percentages and imposing punishments for

unauthorized individuals caught selling secondary tickets on the street.

Unlike Virginia, the state of New York has updated their laws in order to accommodate

for the rise of the secondary ticket market online. Not only does New York abolish the use of

automated bots to purchase tickets online, the state also sets a specific price cap on tickets that

resellers may not exceed (Schneiderman, 2016).

Article 25 of the New York Arts and Cultural Affairs Law regulates how business

regarding the sale of tickets should be conducted. This piece of legislation sets a price cap on

resold tickets of only less than or equal to 10% cost increase of the initial market value (New

York Arts and Cultural Affairs 25.07). The law also addresses legalized ticket scalping in the

form of brokers: requiring a license for those who wish to professionally resell tickets (New

York Arts and Cultural Affairs 25.13) as well as mandating that licensed brokers pay a

refundable $25,000 bond to the state to be used in the case the broker needs to pay damages for

their actions (New York Arts and Cultural Affairs 25.15). As one of the few states to address the

use of automated bots to purchase tickets, one of the most impressive and progressive aspects of

the Art and Cultural Affairs Law is the prohibition of these bots in order to buy tickets for events

statewide (New York Arts and Cultural Affairs 25.24)

Case Law
RETHINKING TICKET RESALE 10

NPS, LLC et al. v. StubHub, Inc. In this 2009 court case, the New England Patriots

brought ticket resale mogul Stubhub to court, claiming the website had intentionally interfered

with the seating rights for the Patriots games. The Patriots contended that the tickets being resold

on Stubhub were invalid because the website is not licensed by the team to sell tickets. At first,

StubHub claimed that their acts were justified under the Communications Decency Act, however,

the Massachusetts Superior Court held that the CDA did not apply to that case and that the

Patriots may proceed with proving the elements of intentional interference of advantageous

relations. The Patriots offer their own resale option through TicketExchange wherein a ticket

holder can sell their ticket to another person with the following steps: 1) the former ticket holder

would be compensated for the ticket cost, 2) the earlier ticket holders previously issued ticket

would be invalidated, 3) the ticket purchaser would be given a new ticket, and 4) the new ticket

holder would pay the cost of the ticket plus a fee. StubHub was not licensed by the Patriots to

resell tickets to their games, leading the Patriots to argue that a number of tickets resold on

Stubhub were not valid as they didnt complete the four aforementioned steps. The court found

that Stubhub knowingly interfered with the relationship between the Patriots team and

TicketExchange with an improper motive or means, and the Patriots were harmed by the actions

of Stubhub (Schroeder et. al, 2012).

United States of America v. Lowson, Kirsch, Stevenson, and Nahdi. Kenneth Lowson,

Kristofer Kirsch, Joel Stevenson, and Faisal Nahdi have all been formally charged by the US

District Court of New Jersey in relation to an ongoing internet hacking ring that utilized

automated bots to purchase over a million tickets for various events. The four defendants worked

in cooperation with companies Wiseguy Tickets and Seats of San Francisco, both specializing in

the secondary ticket market, to ensure their purchased tickets had a marketplace waiting for
RETHINKING TICKET RESALE 11

them. Between the four defendants, over $25 million was acquired through the resale of the

tickets in just a seven year period. In this elaborate scheme, the defendants got in contact with

those who used to work in the ticket industry to maximize their yield and minimize the chances

of any complications with their bot software. Hacking was also used in order to obtain the code

used on websites such as Ticketmaster to identify routes around CAPTCHA tests. The defendants

were indicted on 43 criminal charges ranging from conspiracy to obtaining information from a

protected computer (Zetter, 2010). A U.S. District Court judge sentenced Lowson and Kirsch to

probation of two years with an additional mandatory 300 hours of community service while

Stevenson was sentenced to one year of probation. The fourth defendant, Faisal Nahdi, remains

on the loose (Sisario, 2011).

Solutions

Changes in Business

In an interview with a New York Assistant Attorney General, Jordan Adler, he stated that

the underlying issue of ticket scalping as whole was the underpricing of tickets by initial ticket

vendors (J. Adler, Personal communication, November 22, 2016)*. This common practice leaves

the ticket market with a distribution that is skewed right. Ticket vendors are likely to set prices

lower than the market can bare for a number of strategical reasons. With low ticket prices,

popular events are likely to sell out faster than usual, allowing the venue and promoters to look

more attractive and boast about the desirability about the said event. To maximize profits, ticket

sellers are known to set prices low in order to increase earnings in other facets of the event

business such as merchandise/ memorabilia, food concessions, and parking fees (Bell, 2006).

Ticket prices may also be set lower than below market price in order for artists and

venues to keep a favorable appearance and maintain a steady fanbase. While cheap tickets seems
RETHINKING TICKET RESALE 12

like a positive concept, it only works if fans have the opportunity to buy those tickets,

unobstructed. Selling prices lower than the market can bear allows ticket scalpers to buy more at

a time, taking the opportunity away from true fans. A slight increase in ticket prices across the

board would be overall beneficial and would have a small and barely noticeable impact on the

demand for events, especially see as many fans continue to purchase tickets on secondary ticket

market despite price markups of up to 7,154% (Schneiderman, 2016).

Primary ticket vendors have come under speculation in recent years due to conflicts of

interest in which ticket scalpers may help the company earn profit as well. While denouncing the

use of bots and claiming to support anti-scalping initiatives, many large primary ticket vendors

also run websites specializing in ticket resale. These promoters continue to have closely

associated secondary sale sites, earning a portion of a scalpers proceeds per each transaction

(Bell, 2006). The creation of resale websites by primary vendors has also been picked up by

professional sports teams hoping to further capitalize from the secondary market (Highfield,

2010).

Individual Initiatives

While current laws in place concerning scalping havent adapted to the digital age, many

music artists have taken matters into their own hands to combat scalpers. According to attorney

Jordan Adler, artist initiatives to deter fans from buying tickets from ticket scalpers can be

especially effective. Artists have the power to control price, ticket distribution, number of shows

being performed, where they are performed, limits on purchasing power, and how those limits

are enforced. Through these decisions, artists are able to set the tone for how they want their

events to play out, even persuading fans to purchase tickets in a specific manner rather than
RETHINKING TICKET RESALE 13

further fueling the underground secondary ticket market (J. Adler, Personal communication,

November 22, 2016)*.

Adele. Singer song-writer Adele has started a new initiative to combat ticket scalping by

attempting to get ticket scalpers out of the picture and sell tickets for her 2016 tour directly to

fans. The artist has teamed up with the website Songkick, which specializes in selling directly

through artists websites and fan clubs. Estimates suggest that Songkick and Adeles tag-team

effort has saved more than $6.3 million in price increases from secondary sellers despite only

accounting for eight-percent of the total tickets sold on her North American tour and forty-

percent of the total tickets sold on her European tour (Green, 2015). Through her partnership

with Songkick, Adele was also able to block 53,000 sales from those classified as known or

likely ticket scalpers (Sisario, 2015).

Hamilton: an American Musical. Popular Broadway musical Hamilton has been an

especially sought-after target for ticket scalpers, especially following creator, writer, and star of

the show Lin-Manuel Mirandas announcement of his departure from the title role. While the

average cost of a ticket for Hamilton was $189 prior to the news, ticket scalpers began

charging customers upwards of over $10,000 per single seat to see the play before Mirandas

final night on stage. In the 100 performances starring Miranda, ticket scalper profited more than

$15.5 million. Aware of the popularity of the musical for both regular theatre-goers and ticket

scalpers, Miranda and show producers are known to cancel suspicious bulk seat purchases made

by bots, one of which was able to purchase 20,000 tickets. Miranda and his team have also raised

initial ticket prices in order to combat the secondary resale market for reasons aforementioned

(Fehr, 2016).
RETHINKING TICKET RESALE 14

Attempting to reach out to fans and deter buying tickets on the secondary ticket market,

Hamilton producers have also created a lottery system entitled Ham4Ham. Twice a week,

hopeful fans line up outside the Richard Rodgers Theatre, venue for the popular show, and enter

their names in a drawing for the chance to purchase twenty-one of the $10 front-row tickets up

for grabs. Even fans who were unable to purchase a ticket through the raffle are typically given a

short live performance by various cast members to compensate (Gambino, 2015).

Changes in Legislature

In response to ticket scalping and the abundant use of automated computer programs, a

new U.S. Congressional bill has been proposed that would effectively ban the use of bots to

purchase tickets. The bill, backed by an even number of both Democratic and Republican

cosponsors, looks to prosecute hackers who utilize bots in order to buy hundreds of at a time to

popular events such as Broadway shows and concerts. Aptly titled as the Better Online Ticket

Sales Act, or the B.O.T.S. Act, the proposed bill would outlaw the use of software, including

bots, to avoid measures taken by online ticket sellers to make sure fans are on an even playing

field when tickets are released for sale (Senator Charles Schumer, 2016). Any actions deemed as

unfair or deceptive has the possibility of being prosecuted under the jurisdiction of the Federal

Trade Commission, or the FTC, as the act of ticket scalping with the aid of bots is in violation of

the Federal Trade Commission Act (Countable, 2016).

As of December of 2016, the B.O.T.S. Act has been passed by both houses of Congress

and was signed into federal law by President Barack Obama on December 14, 2016 (Brennan,

2016). Because the law was only recently enacted, the effects of the B.O.T.S. Act have yet to be

seen but offer hope for all consumers in a promising step towards ending ticket scalping.

Conclusion
RETHINKING TICKET RESALE 15

In a perfect market, each consumer would have equal access to all good and services as

well as the ability to pay a fair price for them. The growing market of ticket scalping, however,

negates both of those ideals. Through the use of illegal automated ticket bots, scalpers have an

inherent advantage over any ordinary consumer simply trying to purchase event tickets. Not only

do scalpers block fans from purchasing tickets by buying out large portions of ticket supplies

during initial sales, they, also, deter fans from buying resale tickets due to extravagantly inflated

prices. The existence of a consumer demand-based market system and the creation and

implementation of effective legislation addressing ticket scalping and automated bots do not

have to be mutually exclusive.

RETHINKING TICKET RESALE 16

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