When an organization decides to offer up free goods, there should be strict identification of whether the offering will be a contest, a sweepstakes or a lottery.
As we’ve stated before: a sweepstakes (also known as a giveaway) is a promotional drawing in which prizes are given away at no charge to the participants. Winners are selected at random. Sweepstakes must generally be available at no charge (no purchase or consideration necessary to enter). The winner must be selected at random and, compared to a contest being a game of skill, sweepstakes are a game of chance.
But what is a game of chance?
There is a threshold for determining whether a contest is a game of chance or a game of skill. This varies from jurisdiction to jurisdiction (read: every state is different). Most states use a Dominant Factor Test (also known as the predominance test) to determine which side a contest falls on. The critical component: while plenty of promotions have some skill involved, the Dominant Factor Test determines whether luck or skill is the more important aspect in selecting the winner. Imagine every sweepstakes is on a spectrum but ultimately, chance (or luck) versus skill is the principle that determines what is legally considered gambling.
A court or regulator might look at:
- Whether participants have a distinct possibility of exercising skill and must have sufficient data upon which to calculate an informed judgment. (Is it impossible to win without skill?)
- Whether participants have the opportunity to exercise the skill, and the general class of participants must possess the skill. (Does an amateur have the ability to participate?)
- Whether skill, or the competitors efforts, sufficiently govern the results. (Is skill a part of the game already or is it part of the promotion?)
- Whether the standard of skill is known to the participants, and this standard governs the results. (Are participants aware of the skills involved with the game?)
Some states instead follow the material element test. This test recognizes that a game may be one primarily of skill but chance can have more than an incidental effect on the game and its outcome. Poker is a great example of a game that some states deem a game of chance and other states deem a game of skill. Backgammon would not be a game of skill under this test because the random result of the dice is a material factor in the outcome.
A few states (very few) use the any chance test. Under this test, if there is any element of chance present, it is a game of chance. This could mean that random drops in a MOBA, or variable damage rates, creature spawns, etc., could result in a game being considered a game of chance. Whether skill is the predominant factor in determining outcome or victory is irrelevant in these jurisdictions.
What are examples of games of skill and chance?
| Games of Skill | Games of Chance | It depends… |
| Golf | Shell games | Pinball |
| Chess | Dice games | Poker |
| Cornhole | Bingo | Video games |
This is for the bigger picture question of what is a game of skill versus a game of chance, just to give some context. But in terms of contests and giveaways, games of skill may include:
- Submitting a photo, video or caption
- Submitting an original work of art
- Providing correct answers to questions
To double down on the skill element, a contest runner might include a panel of expert judges outside of the sponsor, or allow for common scoring by which all entrants are judged.
Whereas games of chance for promotions may include:
- Entering an email address
- Liking or following a page
- Commenting on a post
- Voting in a post or poll
- Tagging a photo or a friend
Why does this matter?
Sponsors of contests need to be aware of whether they’re creating a game of skill or chance because of the legal implications and the strict gambling laws in the United States. Some states follow the guide that if chance influences the outcome of a game in any way, shape or form then it is deemed to be illegal gambling.
