Impact of Trump Anti-Scalping Executive Order on StubHub IPO

President Trump’s new anti-scalping executive order could derail the highly anticipated StubHub IPO, exposing the company to potential legal and financial risks. According to Chris Castle, with increased scrutiny on ticket bots, investors may face a much riskier debut than originally expected.

Impact of Trump Anti-Scalping Executive Order on StubHub IPO

Op-Ed by Chris Castle via Music Tech Solutions

As vile as they are, it must be said that StubHub is a leading global marketplace for buying and selling tickets, including speculative tickets that have been banned in some states. StubHub has been preparing for an initial public offering (IPO) in 2025 and has filed its Form S-1 registration statement with the Securities and Exchange Commission. The IPO has investor interest, with expectations of a strong market debut based on the company’s dominant position in the ticket scalping space and its potential for continued growth. At least before this week.

However, recent developments, including the signing of an anti-scalping executive order by President Donald Trump on March 31, 2025 that could lead to intense civil and criminal investigations of StubHub, could have a significant impact on the IPO. The executive order introduces both legal and regulatory uncertainties that may affect the pricing or timing of the offering. The executive order directs increased enforcement of the Better Online Ticket Sales (BOTS) Act of 2016, which aims to combat ticket scalping and the illegal use of bots to acquire tickets for resale. It also calls for recommendations from Cabinet agencies on unknown new regulations to reign in the very scalping business that is driving StubHub’s revenues. This could expose StubHub to heightened scrutiny and potential legal risks to an unknown and highly risky degree, which could in turn affect its IPO.

It’s important to understand that while there may have “always” been ticket scalpers, it’s really short sighted and naive to waive away an EO because “it’s always been that way.” It hasn’t “always” been wannabe public companies making a global market for ticket scalpers with prices going as high as 20x face price. There haven’t “always” been ticket scalpers sued under civil RICO, either. And even if it had, that doesn’t make it right. 

It’s also important to understand that one of StubHub’s leading lobbyists, Mark Meador, was recently nominated by President Trump as an FTC commissioner. This would be fertile grounds for Mr. Meador recusing himself from matters involving StubHub, his former client. While recusal is not a certainty and is fact-dependent, a commissioner who was employed by or represented a company before being appointed to the FTC may be required to recuse themselves from matters involving that company. This is particularly important if a commissioner like Mr. Meador had substantial involvement in relevant decisions or negotiations relating to the FTC’s jurisdiction during his engagement by StubHub which he likely did. Moreover, a commissioner may also need to recuse themselves if they have recently worked on matters involving similar issues or industries that are now before the FTC as would be the case with prosecutions of StubHub under the BOTS Act for which the FTC has primary jurisdiction. 

Potential Impact of the Executive Order

The executive order calls for rigorous enforcement of the BOTS Act, potentially leading to investigations into the use of automated bots for ticket sales on secondary scalping marketplaces like StubHub. While the company says it has implemented anti-bot measures (whatever those are), there is a risk that these efforts may be deemed insufficient, ineffective or not functioning, given the sophistication of modern bot technology and the challenges inherent in policing third-party transactions. It is also unclear just how much daylight there is between bot operations that seem to be operating just fine and StubHub itself.

Key risks to StubHub’s IPO arising from this executive order include:

1. Increased Regulatory Scrutiny: The intensified enforcement of the BOTS Act could result in investigations or legal actions against StubHub for facilitating or failing to prevent illegal ticket reselling. Any perceived failure to comply with the law could lead to reputational damage and potential legal penalties (including prospective legal penalties that are currently unknown), which could undermine investor confidence in the IPO.
2. Civil and Criminal Penalties: The BOTS Act includes penalties of up to $16,000 per violation for civil infractions, as well as potential criminal prosecution for wire fraud or violations under the Racketeer Influenced and Corrupt Organizations (RICO) Act. Although StubHub claims to have policies in place to detect and prevent bot activity, a failure of these measures could expose the company to substantial legal liabilities. Moreover, if President Trump’s investigation leads to new legislation or regulation, it will likely be because of bad facts discovered in the mandated investigation. This introduces significant unknowns into StubHub’s operational risk profile and liability reserves.
3. Public Backlash and Reputational Harm: Even if the company is not directly implicated in any illegal practices, public perception of StubHub as being linked to ticket scalping or bot usage could lead to reputational harm. This could diminish consumer trust and lead to reduced demand for StubHub’s platform and increased concern for consumer class actions or other government consumer protection actions, further complicating its IPO prospects.

[MORE: StubHub files IPO, acknowledges risks ahead]

Potential Consequences for the IPO

Given the potential for regulatory scrutiny and legal risks, there are several possible outcomes for StubHub’s IPO:

1. IPO Pricing Lower Than Anticipated: The uncertainty surrounding the company’s exposure to investigations and potential penalties could lead investors to view StubHub as a riskier proposition. As a result, the company may have to lower the price range of its offering to ensure successful market uptake, which could diminish the proceeds from the IPO.
2. IPO Delay or Withdrawal: If the legal risks stemming from the executive order and its implications for the ticketing industry are perceived as too significant or directly tied to StubHub, StubHub may be forced to delay or even withdraw its IPO entirely. A withdrawal could occur if the company faces imminent legal or regulatory action, or if it is unable to resolve the uncertainty surrounding its compliance with the BOTS Act and other ticketing regulations.
3. Increased Legal or Operational Costs: In addition to direct financial impacts from penalties or reduced IPO proceeds, the company could incur significant costs related to legal defense, compliance efforts, and the implementation of enhanced anti-bot measures. These additional costs may further lower the anticipated financial returns from the IPO.

StubHub’s Form S-1 registration statement is, in my view, a bit light on the disclosures related to the significant harms that could result from President Trump’s anti-scalping executive order. There are some risk factors that touch on the issues, but they could use more. Here’s a draft risk factor that highlights some of my concerns. There’s nothing like this in the S-1, but let’s watch this space.

Risk Factor: Potential Exposure to Legal and Regulatory Scrutiny, Including Prosecution for Wire Fraud and Violations of RICO Laws Due to the Failure of Anti-Bot Precautions

Our business faces significant risks associated with potential legal and regulatory scrutiny in connection with ticket reselling practices, particularly as a result of the failure or inadequacy of our anti-bot precautions. On March 31, 2025, President Donald Trump signed an executive order directing the Federal Trade Commission (FTC) and other agencies to intensify enforcement of the Better Online Ticket Sales (BOTS) Act of 2016. The BOTS Act aims to prevent the use of automated software (bots) to bypass ticketing security measures and acquire large quantities of tickets for resale at inflated prices. Despite our ongoing efforts to prevent bot activity on our platform, we may be vulnerable to legal and regulatory actions if bots continue to be used by resellers to exploit our marketplace.

In particular, the failure of our anti-bot measures, whether due to technological limitations, insufficient monitoring, or evasion by malicious actors, could expose us to significant legal risks. These include potential civil penalties of up to $16,000 per violation under the BOTS Act. Moreover, if bot activity is determined to be fraudulent or part of a coordinated effort to manipulate ticket markets, we could face criminal prosecution for wire fraud. The misuse of bots for ticket reselling may be viewed as a fraudulent activity under federal law, subjecting us or our users to severe penalties, including substantial fines and imprisonment.

In addition to risks under the BOTS Act and wire fraud statutes, failure to adequately prevent bot activity could expose us to prosecution under the Racketeer Influenced and Corrupt Organizations (RICO) Act at both the state and federal levels. RICO violations could lead to severe penalties, including significant financial damages, asset forfeiture, and possible prison sentences for individuals involved in bot-facilitated illegal activities.

While we have implemented measures to detect and prevent bots on our platform, the evolving nature of bot technology and the sophistication of those who exploit it present ongoing challenges. If we are unable to effectively block bots or if our anti-bot precautions fail to detect and prevent large-scale exploitation, we could face substantial legal exposure, including class-action lawsuits, regulatory fines, and criminal penalties. Furthermore, these failures could result in significant reputational harm, diminishing consumer trust, reducing demand for our services, and leading to increased scrutiny from regulators.

Given the potential for significant legal and financial consequences from the failure of our anti-bot precautions, including the risk of prosecution for wire fraud or RICO violations, we cannot predict the ultimate outcome of any investigation or enforcement actions. However, these risks could materially adversely affect our business, financial condition, operations, and reputation.

While we are committed to complying with all applicable laws and regulations, including the BOTS Act, the ongoing investigation and enforcement actions in response to the executive order present a risk of exposure, both to our business and to the broader ticketing industry, which could have a material adverse effect on our operations and financial results.

MORE: StubHub files IPO, acknowledges risks ahead