Businesses often use games of chance to promote products, increase traffic to their websites, and increase revenues. When set up correctly, games of chance can be a boon for business. However, when fashioned incorrectly, the consequences include reputational harm, civil litigation and even criminal liability. Games of skill (as opposed to chance) are regulated at both the state and federal level. Each state evaluates games of skill by using either: 1) the dominant factor test; 2) the material element test; or 3) the any chance test. A sweepstakes lawyer can help analyze the risk associated with promoting games of chance and skill based on the various jurisdictional tests.
How do states evaluate games of skill?
Games of Skill Tests
A lottery exists when people pay for the chance to win a prize. States alone reserve the right to administer lotteries. However, businesses may legally sponsor a promotional game by eliminating one element of what would otherwise be an illegal lottery. If payment is removed, the lottery becomes a legal sweepstakes, and if chance is removed, the lottery becomes a game of skill. The question that states have grappled with forever is, how much skill must be involved for the contest to be considered a game of skill?
Most states abide by the “dominant factor test.” The dominant factor test analyzes whether skill or chance dominates when determining the winner(s) of the subject contest. Generally, states take into account whether: 1) a skillful player wins more often than an unskilled player; 2) skill can be developed through experience, training or learning; 3) the players’ skills determine the result of the applicable contest; and 4) the level of skill required to earn a prize is known to entrants in advance.
Other states follow the “material element test,” which analyzes whether the element of chance has more than a mere incidental effect on the outcome of the game, even if the game may be one primarily of skill.
Finally, a few jurisdictions employ the “any chance test.” In these states, games exhibiting even a limited amount of chance will be deemed illegal gambling.
To illustrate the game of skill tests, let us look at the game of backgammon as an example. States that follow the dominant factor test may determine that the strategy involved in backgammon outweighs the chance created by the roll of the dice, and, therefore, that the game amounts to a legal game of skill. However, states that would evaluate backgammon through use of the material element test are likely to find that the roll of the dice is so material to the outcome of the game, that the game constitutes illegal gambling. Last, states that use the any chance test, will, obviously, determine that backgammon is illegal gambling because of the inherent chance involved in the rolling of dice.
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Scheduling a free consultation with Klein Moynihan Turco is a great place to start.
Hiring a Sweepstakes Lawyer
Over the years, everything from pinball to fantasy sports have been evaluated by courts of law to rule on whether such games constitute lawful games of skill or illegal games of chance. A sweepstakes lawyer can evaluate applicable statutes and case law to analyze the risk associated with promoting certain games of skill/chance for purposes of guiding businesses through the legal and regulatory minefield that characterizes the contest industry.
If you require assistance in connection with your sweepstakes and contest promotions, please email us at firstname.lastname@example.org, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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