The Justice Division’s October 15 lawsuit towards ticket dealer REPS & Company and three of its executives could develop into probably the most vital ticket scalping enforcement instances lately. Not merely due to the staggering numbers concerned, however as a result of it raises an uncomfortable query for your entire secondary ticket market: How does an organization spend greater than $1.3 billion buying tickets allegedly obtained by way of illegal strategies with out attracting the eye of the companies financing, facilitating and benefiting from these transactions?
In line with the federal government’s criticism, REPS acquired greater than 18.5 million tickets between January 2022 and October 2025, producing at the very least $120.8 million in earnings by way of resale. The defendants embody CEO Ryan Pancheri, President Brian Archibald and Chief Working Officer Nicholas Totagrande. The federal government alleges violations of the Higher On-line Ticket Gross sales Act (BOTS Act) and the Federal Commerce Fee Act. These stay allegations, not findings of legal responsibility.
Thanks for studying! Subscribe totally free to obtain new posts and assist my work.
The REPS case presents two issues that stretch effectively past a single ticket dealer. The primary is the monetary and technological infrastructure that makes industrial-scale ticket scalping doable: the capital used to buy tickets, the software program used to bypass buying limits, and the secondary marketplaces by way of which the stock is monetized. The second is a spot in federal racketeering enforcement. Congress has not made BOTS Act violations into “predicates” underneath the Racketeer Influenced and Corrupt Organizations Act (aka “RICO”), whereas non-public civil RICO claims towards resale intermediaries could also be diverted into necessary arbitration primarily based on the potential defendant’s web site Phrases of Service, as occurred in Kaiser v. StubHub. The REPS case presents a chance to observe the cash, study the potential legal responsibility of understanding contributors, and think about two legislative reforms: making aggravated commercial-scale BOTS violations RICO predicates and establishing a basic exception to necessary arbitration for civil RICO claims throughout all industries.
The allegations describe one thing far faraway from the acquainted picture of a scalper shopping for a couple of further tickets.
In line with the criticism, REPS used hundreds of buying accounts, digital bank cards, proxy servers, VPNs, a number of browser classes and groups of staff, primarily within the Philippines, to bypass ticket-purchasing restrictions.
REPS allegedly bought greater than eight tickets for at the very least 83,000 occasions. For instance, at Beyoncé’s October 2023 Kansas Metropolis live performance, the corporate allegedly employed roughly 1,300 accounts to accumulate 7,624 tickets, producing about $833,000 in earnings. At a September 2024 Pitbull live performance, REPS allegedly acquired 5,430 tickets utilizing at the very least 700 accounts.
These allegations are significantly important as a result of ticket limits are generally established on the artist’s request. Circumventing these limits does greater than exploit a technological vulnerability. It defeats an artist’s deliberate resolution about how tickets ought to attain followers and violates the social contract between artist and fan.
The defendants are accused of constructing a industrial operation round these restrictions somewhat than merely violating them often. It’s the size and construction that acquired me pondering RICO. After which there’s the cash.
The place did they get the cash to drift this operation is without doubt one of the most vital questions the federal government’s criticism leaves unanswered at the very least thus far.
The criticism establishes the alleged scale of ticket buying and describes in depth use of digital bank card accounts managed by REPS. It additionally states that REPS represented its compliance with the BOTS Act to distributors and lenders.
However the criticism doesn’t establish the underlying sources of the $1.3 billion in ticket-purchasing expenditures.
Had been these purchases financed by way of revolving credit score amenities, non-public traders, institutional lenders, working money move, advances towards future ticket gross sales or some mixture? And in that case, the place did they get the cash, and so forth and so forth.
The excellence could also be essential. Understand that the $1.3 billion represents cumulative purchases over almost 4 years, not essentially $1.3 billion in capital excellent at anyone time. However nonetheless. It’s solely rock and roll, ya know?
Fast stock turnover and reinvestment might assist buying quantity considerably higher than the corporate’s preliminary capitalization. Nonetheless, the financing preparations deserve investigation.
A lender advancing funds towards ticket stock ought to be enthusiastic about how that stock was acquired, whether or not it may very well be cancelled, and whether or not the borrower’s enterprise mannequin trusted circumventing statutory restrictions. And the borrower ought to be enthusiastic about precisely the place that cash got here from.
Paragraph 60 of the criticism is especially attention-grabbing. The federal government alleges that REPS recognized the BOTS Act as an relevant regulation in a 2022 monetary audit questionnaire, required companion corporations to comply with adjust to the statute, and represented to distributors and lenders that it complied with the Act.
Had been these representations verified? Did lenders obtain audit studies? Did anybody examine uncommon buying patterns or using hundreds of digital bank cards?
None of those questions establishes wrongdoing by a lender. However they’re authentic due diligence questions regarding an operation allegedly answerable for billions of {dollars} in ticket transactions.
The query will not be merely the place the tickets went. It’s the place the buying capital got here from and what representations—if any—made that financing doable.
In contrast to the financing preparations, the resale locations are expressly recognized in paragraph 5 of the criticism.
The federal government identifies six secondary marketplaces by way of which REPS allegedly resold tickets (acquainted names):
· StubHub
· Vivid Seats
· SeatGeek
· Gametime
· Ticket Community
· Ticketmaster’s resale market
The criticism doesn’t specify what number of tickets every platform dealt with, the income attributable to every, or the charges and commissions collected by these platforms. That info ought to be central to the following stage of investigation.
These marketplaces could possess in depth transaction data figuring out sellers, stock, gross sales volumes, account histories and settlement funds. These data might assist set up whether or not market operators acknowledged the extraordinary scale of REPS’s alleged operation.
The BOTS Act is very related right here. Below 15 U.S.C. § 45c(a)(1)(B), Congress prohibited promoting or providing to promote tickets obtained by way of illegal circumvention when the vendor participated in or might management the circumvention, or knew or ought to have identified the tickets have been obtained that means.
The statute due to this fact already reaches sure downstream transactions. A reseller needn’t personally defeat an entry management to face potential BOTS Act legal responsibility. Whether or not a market itself qualifies as a vendor underneath explicit circumstances is a separate query requiring evaluation of its contractual and operational position. However that distinction solely makes the invention questions extra vital.
What did the resale marketplaces learn about REPS? What vendor verification procedures did they make use of? What uncommon transaction patterns have been seen? Had been suspicious buying and resale accounts investigated?
The named marketplaces will not be defendants within the REPS motion, and their look within the criticism doesn’t set up legal responsibility. Nonetheless, their position as potential sources of proof—and income recipients—deserves scrutiny.
Maybe the criticism’s most revealing allegation regarding a 3rd social gathering seems in paragraph 43. The federal government alleges that REPS used Dealer Genius Inc., doing enterprise as Automatiq, to automate the creation of a whole bunch of ticket issuer accounts. The criticism additionally identifies Automatiq’s position in integrating REPS with secondary marketplaces, together with Vivid Seats, and robotically itemizing tickets for resale.
It is a important distinction. The allegations concern not merely software program that organizes stock however expertise allegedly used to create buying accounts central to the federal government’s circumvention concept.
It raises questions on what Automatiq knew in regards to the function and operation of these accounts, what providers it really offered, and whether or not it had cause to suspect violations of buying restrictions.
Automatiq will not be named as a defendant, and the criticism doesn’t set up that it knowingly participated in illegal conduct. Nonetheless, paragraph 43 identifies a expertise supplier whose providers warrant examination as a part of the alleged operation’s industrial infrastructure.
The query is whether or not expertise suppliers are merely supplying authentic instruments or knowingly facilitating conduct that relies on circumventing statutory restrictions.
The $120.8 million in alleged REPS earnings is simply a part of the financial image.
The unique ticket issuer obtained fee on the preliminary sale. REPS allegedly collected resale proceeds. The secondary marketplaces probably collected transaction charges. Know-how suppliers, fee processors and monetary intermediaries may have earned compensation.
The criticism doesn’t quantify these extra revenues, and their receipt wouldn’t itself set up illegal conduct. However the financial query stays: How a lot cash did the broader ticketing ecosystem acquire from stock allegedly obtained in violation of federal regulation?
For artists, this isn’t merely a shopper pricing challenge. Artists could set up ticket limits to offer followers an affordable alternative to acquire tickets on the unique worth. A industrial middleman who circumvents these limits can successfully override the artist’s distribution coverage.
For the general public, the ensuing markup could signify a switch of worth from followers to intermediaries who contributed nothing to creating the efficiency.
The REPS criticism describes an allegedly coordinated, multiyear operation involving tens of millions of ticket purchases, hundreds of accounts, abroad personnel, expertise distributors, monetary intermediaries and main resale platforms.
But the federal government has introduced a civil enforcement motion underneath the BOTS Act and FTC Act somewhat than prison racketeering expenses underneath our previous pal RICO.
So why not RICO—but? Primarily as a result of the BOTS Act itself will not be a “predicate” offense underneath the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961–1968. Separate conduct may assist present RICO predicates with out amending the Act, equivalent to wire fraud, however circumvention of ticket-purchasing restrictions by itself doesn’t robotically represent wire fraud. A prosecutor must set up the weather of an impartial predicate offense, together with a qualifying scheme to acquire cash or property by way of materially fraudulent pretenses.
The representations allegedly made to lenders deserve consideration on this context. Had been they knowingly false? Had been they materials to financing selections? Did anybody receive cash or property by way of misleading representations?
These are questions for investigation, not findings of prison wrongdoing. But.
Nor would proof of a BOTS violation robotically set up a RICO enterprise. The federal government must show the existence of an enterprise, a sample of qualifying racketeering exercise and every defendant’s legally ample participation.
However the REPS allegations invite a broader query: Ought to Congress distinguish organized, commercial-scale BOTS violations from remoted ticket-purchasing offenses and make the aggravated conduct eligible for RICO prosecution?
There may be one other impediment to racketeering accountability within the secondary ticket market. In Kaiser v. StubHub, Inc., No. 1:24-cv-00044 (S.D.N.Y.), Daniel Kaiser introduced a putative class motion alleging, amongst different issues, civil RICO violations arising from allegedly invalid or bogus tickets bought by way of StubHub.
StubHub sought dismissal or enforcement of its arbitration settlement underneath Stubhub’s clickwrap phrases of service. In July 2024, Decide Jennifer Rochon granted StubHub’s movement to compel arbitration and stayed the case with out deciding the deserves of the RICO allegations. The court docket acknowledged that civil RICO claims are arbitrable underneath the Supreme Court docket’s resolution in Shearson/American Specific Inc. v. McMahon, 482 U.S. 220 (1987). (Lengthy pre-dating the prevalence of click on by way of arbitration clauses.)
There is a crucial postscript. In November 2024, the Kaiser events knowledgeable the court docket that that they had agreed to not pursue arbitration, and the court docket directed that the case be closed absent additional objection. Thus, the general public judicial document doesn’t set up both racketeering legal responsibility or an arbitral willpower of the RICO claims.
However the procedural end result stays important. The case demonstrates how a personal RICO declare towards a ticketing middleman could be faraway from public judicial consideration earlier than the substantive allegations are examined.
Arbitration doesn’t extinguish RICO legal responsibility. It could possibly, nonetheless, forestall a proposed class motion from continuing in court docket and considerably alter the sensible incentives for personal enforcement. Observe that any shopper arbitration clause will not be related for the REP events as a result of it doesn’t apply to authorities motion.
The underlying query is bigger than StubHub or ticket resale. Ought to a enterprise accused of collaborating in a racketeering enterprise be capable to invoke a predispute shopper contract to forestall a civil RICO declare from continuing collectively in federal court docket?
Congress ought to rethink that end result.
The benefits of a RICO prosecution over the federal government’s present BOTS Act enforcement authority may very well be substantial. Below the prevailing framework, DOJ and the FTC can pursue civil penalties and injunctive reduction towards events violating the BOTS Act. These cures are vital, however they’re principally directed at prohibited ticketing practices and the defendants answerable for them. It’s probably that simply as the federal government completely underestimated the billions of take down notices underneath the DMCA, in addition they didn’t understand the potential for mischief underneath BOTS.
RICO presents one thing essentially totally different: an enforcement framework directed on the prison enterprise itself.
Prosecuting the Enterprise, Not Simply Particular person Transactions
RICO permits prosecutors to deal with an ongoing prison enterprise somewhat than treating every illegal transaction as an remoted violation.
Investigators might study the relationships amongst ticket brokers, expertise suppliers, monetary intermediaries and resale platforms to find out whether or not contributors constituted an enterprise conducting its affairs by way of a sample of racketeering exercise.
A RICO prosecution wouldn’t require each participant to personally circumvent ticket-purchasing restrictions. Nonetheless, legal responsibility would require proof of the defendant’s participation in conducting the enterprise’s affairs by way of the requisite sample of racketeering exercise. Merely offering abnormal industrial providers wouldn’t set up legal responsibility.
The central query turns into who participated within the enterprise, what they knew, once they knew it, and what they did with that data.
Prison Penalties That Change the Economics
Prison RICO offers penalties considerably extra severe than abnormal civil BOTS Act enforcement.
Below 18 U.S.C. § 1963, a prison RICO conviction typically carries a most sentence of 20 years’ imprisonment, along with relevant fines and forfeiture.
That adjustments the financial incentives for contributors who may in any other case deal with regulatory penalties as a price of doing enterprise.
There is a crucial distinction between paying a civil penalty and dealing with potential imprisonment for collaborating in an organized racketeering enterprise.
Following the Cash By way of Prison Forfeiture
Maybe essentially the most consequential benefit is RICO’s prison forfeiture authority.
Prosecutors could search forfeiture of proceeds derived from racketeering exercise and qualifying pursuits within the enterprise itself. Relying on the proof and possession construction, these cures can attain past penalties imposed for particular person ticketing violations.
The REPS criticism alleges greater than $1.3 billion in ticket purchases and at the very least $120 million in earnings. These figures will not be themselves a calculation of legally forfeitable property, however they exhibit why tracing the proceeds of an alleged enterprise may very well be vital.
Prison forfeiture can deprive convicted contributors of qualifying prison proceeds and enterprise pursuits, somewhat than merely imposing a further expense on an in any other case persevering with enterprise.
Exposing the Monetary and Technological Infrastructure
A correctly supported RICO investigation might additionally illuminate the monetary structure behind industrial-scale ticket scalping. Monetary data, credit score amenities, possession preparations, fee flows and communications might assist set up how the operation was financed, organized and managed.
The REPS criticism alleges that the corporate represented its compliance with the BOTS Act to distributors and lenders. That allegation raises authentic questions in regards to the financing of its operations and the representations on which financing selections have been primarily based.
None of this establishes wrongdoing by lenders, resale platforms or expertise suppliers. Nonetheless, the place proof establishes understanding participation within the conduct of a racketeering enterprise, RICO provides an enterprise-level concept of prison legal responsibility.
Importantly, DOJ already possesses substantial investigative authority in abnormal prison investigations. RICO doesn’t create limitless investigative powers. Its limiting precept and distinctive contribution is the power to prepare qualifying prison conduct into an enterprise prosecution with corresponding penalties and forfeiture cures.
Escaping the Arbitration Lure
The excellence between public prosecution and personal arbitration is especially vital in mild of Kaiser v. StubHub.
In Kaiser, the plaintiff asserted civil RICO claims arising from alleged ticketing misconduct. The federal court docket compelled arbitration underneath StubHub’s consumer settlement with out deciding the deserves of these claims.
Crucially, a federal prison prosecution can’t be diverted into non-public arbitration by a shopper contract.
That gives one more reason authorities enforcement is extremely related to those huge ticketing instances. It could possibly examine allegations of organized misconduct independently of arbitration clauses imposed on customers.
However authorities prosecution alone will not be sufficient. Congress additionally offered civil RICO cures exactly as a result of non-public enforcement can complement public prosecution.
The broader arbitration downside due to this fact deserves a separate legislative response.
The REPS allegations and Kaiser illustrate two distinct weaknesses within the present enforcement framework.
Make Aggravated BOTS Act Violations RICO Predicates
Congress ought to think about making a narrowly tailor-made prison offense for understanding, willful, repeated and commercial-scale BOTS Act violations, and expressly together with that offense among the many predicate offenses enumerated underneath 18 U.S.C. § 1961(1).
The aim wouldn’t be to criminalize abnormal ticket resale or remoted violations. It might be to deal with sustained industrial operations intentionally organized round circumventing federal ticket-purchasing restrictions.
Qualifying violations might then assist a RICO prosecution the place the federal government additionally establishes the requisite enterprise, sample of racketeering exercise and different statutory components.
This might permit prosecutors to look at your entire operation, together with culpable contributors past the unique ticket purchaser, somewhat than limiting enforcement to discrete buying violations.
Restore Entry to Federal Courts for All Civil RICO Plaintiffs
Congress must also set up a basic statutory exception to necessary predispute arbitration for civil RICO claims, no matter trade. In Shearson/American Specific Inc. v. McMahon, 482 U.S. 220 (1987), the Supreme Court docket held that civil RICO claims are arbitrable underneath the Federal Arbitration Act.
Congress ought to rethink that rule in mild of how on-line corporations leverage the loophole which was not a problem earlier than the Court docket in 1987. Civil RICO offers non-public plaintiffs with cures that embody treble damages and attorneys’ charges underneath 18 U.S.C. § 1964(c). Congress created these cures to encourage non-public enforcement towards racketeering exercise to not have the rights extinguished by way of a click on by way of settlement the buyer probably by no means learn or appreciated.
Compelling claims into confidential, individualized arbitration can undermine that Congressional function by limiting the sensible potential of injured events to problem systemic misconduct.
A basic exception ought to invalidate necessary predispute arbitration provisions for civil RICO claims whereas permitting events to agree voluntarily to arbitration after a dispute arises.
The exception must also deal with predispute class-action waivers that will in any other case frustrate collective enforcement, with out meting out with the abnormal necessities for sophistication certification.
Congress has already established a precedent for exempting sure claims from predispute arbitration agreements by way of the Ending Pressured Arbitration of Sexual Assault and Sexual Harassment Act of 2021. The precept ought to obtain severe consideration within the civil RICO context as effectively.
This isn’t a ticketing-specific downside. Racketeering allegations can come up in monetary providers, shopper transactions, industrial enterprises and different industries. The supply of a public judicial discussion board for federal civil RICO claims mustn’t depend upon the defendant’s potential to impose an arbitration clause.
Observe the Cash—and Make the Regulation Observe It, Too.
The REPS criticism describes an alleged operation of extraordinary scale. Its financing preparations, expertise infrastructure, market relationships and distribution of proceeds deserve cautious examination.
The BOTS Act prohibits sure illegal ticket-acquisition practices. However the statute doesn’t presently make these violations RICO predicates, even when the conduct is systematic and commercially organized.
In the meantime, Kaiser demonstrates that non-public civil RICO claims towards ticketing intermediaries could be compelled into arbitration and not using a public willpower of the underlying allegations.
The result’s an accountability hole that Congress ought to study.
Organized ticket scalping mustn’t escape enterprise-level prison scrutiny just because the underlying statutory offense is lacking from RICO’s predicate checklist. Nor ought to non-public civil RICO enforcement, in any trade, be pissed off by necessary predispute arbitration and class-action waivers.
The federal government’s REPS case presents a chance to research not solely who acquired the tickets, however who financed the operation, who facilitated the transactions, who knew what was taking place and who finally collected the proceeds. Congress ought to be certain that federal regulation offers significant cures when the proof establishes an organized racketeering enterprise.
Observe the cash. Observe the enterprise. And ensure the regulation can observe each.
