The ticketing industry, as we know, impacts millions of people around the world, as well as being responsible for moving billions of dollars. According to a study recently carried out by Mordor Intelligence [ 1] , the ticketing market was valued at US$28.4 billion in 2021 and is expected to reach US$94.9 billion by 2027.
In view of this, the importance of this market is clear, as in addition to transacting significant amounts of money, it is responsible for providing access to all individuals to a wide range of events in different segments, from lectures and corporate events to sports and entertainment shows, the latter being the focus of this study, given that they are at the heart of the biggest problems in this industry: ticket scalping and counterfeiting.
Undoubtedly, these are problems that are not exclusive to our country, having even occurred recently in the last edition of the European Champions League final between Real Madrid and Liverpool [ 2] , and they must be resolved with a view to providing greater security to consumers, as well as to optimizing this market in favor of the enormous economic and social benefits arising from the operation.
At this point, seeking to mitigate the aforementioned problems, technological integration into existing business models is increasingly imperative to ensure greater economic benefits for the players involved and legal security.
In effect, the tokenization process is addressed, consisting of the conversion of tangible, intangible, fungible or non-fungible assets into digital assets, enabling their transfer to third parties through blockchain technology. In this case, the asset to be tokenized is precisely the ticket.
In this scenario, the infamous NFTs (non-fungible tokens), considered by many to be a scam and which were stigmatized as simple digital images, whose price reached exorbitant amounts, in allusion to projects that were limited to profile pictures and exclusive communities, such as the Bored Ape Yacht Club (BAYC), are currently presented as the solution for the industry.
This is because NFTs are certificates of authenticity of a digital asset or a digital representation of a physical asset, registered on a blockchain. Since they are part of this technology, it is possible to analyze who issued the token to validate whether it is actually original or not, which, consequently, makes it impossible to counterfeit it.
Furthermore, the NFT serves as a certificate of ownership, which makes it possible to verify who owns that digital asset by simply checking whether that token is in the wallet of the individual who is trying to use that ticket, given the traceability of this digital asset, providing greater security. In addition, it is possible to understand who the individuals present at the show are, their preferences and consumption habits.
As if that were not enough, ticket tokenization would bring another important advantage to event organizers, namely, the monetization of the secondary market. This is because, when issuing the NFT, the event organizer can stipulate in the smart contract (a contract that automatically executes predetermined rules if certain conditions are met) a percentage to be received by the event organizer in the event of the original holder’s ticket being resold to a third party. In other words, if a fan of a club has purchased a ticket and for some reason can no longer attend the game, he will have the possibility of trading this tokenized ticket on an exchange , whose market is global and operates 24 hours a day, seven days a week, and the event organizer can receive a percentage of the value of this resale.
This is without taking into account 1) the possibility of preventing, through programming in the smart contract , certain tickets from being transferred, such as free tickets granted by law; 2) the prohibition of certain individuals from accessing the venue of the show, such as members of organized fan groups who may be banned from attending the stadium; 3) the design of collectible tickets for souvenirs and eventual resale on the secondary market with consequent potential for generating revenue post-event; and 4) the possibility of ensuring holders of certain NFTs access to specific experiences and/or benefits before, during or after the show, among several other opportunities.
It turns out that the practice of reselling event tickets, which gives rise to the so-called secondary ticket market, popularly known as scalping, is considered a crime in Brazil, under Law 10.671/2003, also known as the Fan Statute, which, following the amendment made in 2010, began to specifically provide for the aforementioned practice in the context of sporting events [ 3] .
It turns out that the mere prohibition of a conduct and/or activity is usually not enough to prevent it from being perpetrated by people. Even though there are severe sanctions and strong monitoring by the State, some activities, due to their high profitability and sociocultural appeal, attract those who, despite the risks, aim to obtain exponential profits, even if engaging in illicit activity, as in the present case.
In this context, scalpers appear, charging exorbitant prices for tickets that would not be used and were purchased by them to be resold to third parties interested in attending the show. As can be seen, in the end, the aforementioned prohibition seriously harms consumers interested in attending the event, since, without the possibility of purchasing tickets on a regulated secondary market, they find themselves forced to buy tickets from scalpers, who charge unrealistic prices in order to compensate for the risks involved in their illegal activity.
It is certainly reasonable that the charging of abusive prices should be prevented in this market, as well as the practice of other possible illicit activities, such as money laundering and tax evasion. On the other hand, its mere prohibition has proven not to be the best remedy for protecting the consumer, since it clearly harms them.
Thus, having demonstrated the numerous advantages of regulating the secondary ticket market, it becomes interesting to present the legal viability of the ticket resale operation based on the Economic Freedom Law .
Based on the aforementioned law, the national legislator sought to guarantee greater protection for free initiative and free competition, values provided for in the Federal Constitution, and for professional freedom.
That said, it is worth highlighting, by analogy to the controversy involving the company Uber and its possible ban in the country, that the position of the Federal Supreme Court (STF) in the Argument of Non-Compliance with Fundamental Precept 449/DF was to understand the unconstitutionality of the ban on the provision of this service in the country, in respect of the freedom of exercise of economic and professional activities by citizens.
Thus, it can be understood that the Brazilian State must, as a rule, allow an economic activity to be carried out, regulating whatever is necessary to prevent abuses and illegalities, especially in this case where the prohibition and criminalization of this activity causes clear harm to consumers and other stakeholders .
Furthermore, it makes no sense to maintain the ban on activities in this sector in the country. On the contrary, its legalization and regulation would be in accordance with the principles adopted by the national legal system, in addition to providing greater effectiveness to consumer protection and stimulating the economy.
After all, it is legitimate for the consumer to prefer to purchase a ticket with greater convenience, through means not offered by the event promoter, but provided by other agents at a reasonable cost. Furthermore, it is also reasonable for the consumer who can no longer attend the event to have options to offset the loss incurred, through the market itself.
In view of this, it is essential to legalize this activity and regulate the secondary ticket market, whose activity must, from then on, be permitted based on the principles of free enterprise and free competition, considering the numerous benefits linked to the use of blockchain technology, which will provide advantages to all stakeholders , including, but not limited to, greater security in the acquisition of tickets, considering that NFTs are certificates of authenticity, which makes it impossible to counterfeit a ticket, as well as being traceable, which allows verification of who is the owner of that digital asset – ticket – through a simple check whether that token is inside the wallet of the individual who is trying to use that ticket.
The potential of the secondary market for tickets to sporting and entertainment events is enormous, its advantages are clear and the technology already exists and is validated, which is why there are no reasons for the Brazilian State to prohibit and criminalize the exercise of this economic activity.
It cannot be forgotten that Bitcoin and cryptography created virtual currency and the digital economy, while NFTs are responsible for conceiving the internet of property. Every asset that has value in the physical world will be represented digitally as non-fungible tokens in the near future and to deny this is to ignore an already established reality.
[1] https://www.mordorintelligence.com/pt/industry-reports/global-online-event-ticketing-market-industry#:~:text=Download%20Free%20Sample-,Vis%C3%A3o%20geral%20do%20mercado,como%20o%20per%C3%ADodo%20de%20previs%C3%A3o). Accessed on 11/11/2022.
[2] https://ge.globo.com/futebol/futebol-internacional/liga-dos-campeoes/noticia/2022/05/29/final-da-champions-registra-68-torcedores-presos-e-174-feridos.ghtml. . Accessed on 11/12/2022.
[3]Article 41-F. Selling tickets for sporting events at a price higher than that stated on the ticket:
Penalty – imprisonment of 1 (one) to 2 (two) years and a fine.
Article 41-G. Providing, diverting or facilitating the distribution of tickets for sale at a price higher than that stated on the ticket:
Penalty – imprisonment of 2 (two) to 4 (four) years and a fine.
Guilherme Macêdo: Partner at Marcello Macêdo Advogados and associate at Win The Game