Skill Contests Versus Sweepstakes and When You Can Charge to Enter

By Hank FasthoffJuly 3, 2026

A promotion is an illegal lottery when it combines a prize, chance, and consideration. Every lawful promotional format avoids that combination by removing at least one element. A sweepstakes removes consideration by offering a free method of entry, which is why sweepstakes sponsors can't charge to enter. A contest removes chance by selecting winners on skill, and removing chance is what permits an entry fee. Cook-offs, photography competitions, business plan contests, and hackathons with buy-ins all depend on chance being absent from every stage of winner selection, because the moment chance enters, a paid promotion combines all three elements and becomes a lottery.

States don't agree on what counts as chance. Some ask whether skill predominates over chance in the winner selection. Others ask whether chance plays any material role at all, and under those statutes even a residual chance element in an otherwise skill-based contest can make the promotion illegal. For a paid contest, that variation dictates the design. A promotion charging entry fees nationwide has to satisfy the strictest chance standard among the states it reaches, and a few states regulate paid skill contests directly on top of their chance tests.

How States Define Chance

New York's penal law defines gambling to cover contests whose outcome depends in a material degree on chance, though New York courts have historically asked which element dominates, an approach established in People ex rel. Ellison v. Lavin (N.Y. 1904). Connecticut's gambling definition, General Statutes Section 53-278a, covers money risked on outcomes contingent in whole or in part on chance, and North Dakota's, Century Code Section 12.1-28-01, uses the same "wholly or partially" language. Under statutes that broad, any residual chance element in a paid promotion is enough to make it illegal. Both states carve out contests of skill, but each carve-out covers only awards made to entrants or owners of entries, a limitation worth reviewing when a prize pool is funded from somewhere other than entry fees. Louisiana's gambling statute, Revised Statutes Section 14:90, extends to any contest conducted as a business in which a person risks something of value to realize a profit, and it names contests without requiring a chance element at all. A paid contest operated as a business in Louisiana risks prosecution under that statute regardless of how much skill controls the outcome.

Judging Is Where Skill Contests Fail

A contest is a contest only while skill determines the winner, and you prove that through judging design. Criteria need to be objective, written, and disclosed before entry, and judges need qualifications that match those criteria. A sponsor who picks the winner by scrolling submissions and choosing a favorite has introduced arbitrariness that a strict-test state will treat as chance. Public voting introduces the same exposure, because a popularity vote measures the audience rather than the entrant, and regulators applying the stricter chance tests have declined to treat it as a test of skill.

A random tie-breaker is the most damaging provision a drafter can include in paid contest rules. Selecting a tied winner "at random" introduces chance into the winner selection, and in a paid contest that language may be enough to convert the entire promotion into a lottery. Arizona spells this out in Revised Statutes Sections 13-3301 and 13-3311. When any drawing or lottery element enters the winner selection, the paid contest exception no longer applies, and rules filed with the attorney general must include tie-breaking procedures. Resolve ties through skill, whether by a judge ranking, a tiebreaker round, or a split prize, and put the method in your rules before entries open.

You can't solve this by combining a skill qualifying round with a random drawing among the top scorers. However demanding the qualifying round was, the drawing introduces chance into the final selection. If entrants paid to compete, the promotion now combines prize, chance, and consideration. If you want a drawing in the format, drop the fee. If you want the fee, let skill control the outcome all the way through.

States That Regulate Paid Contests Directly

Some states regulate paid skill contests through separate statutes, independent of their general chance tests.

In 2013, Vermont enacted Title 9, Section 2481x, which permits entry fees, service charges, and purchases for any game of skill or promotion that is not based on chance. Before 2013, Vermont restricted paid contests, and some industry charts still cite the old rule. Arizona takes the opposite approach. A paid intellectual contest is lawful there only when the payment is part of an established purchase price for a product with no increment added for the contest, and you must register with the attorney general before launch, file complete rules, name an Arizona agent for service of process, and file winners' names and addresses within 10 days of awarding prizes. A standalone entry fee doesn't fit Arizona's exception at all.

Maryland's Commercial Law Section 13-305 prohibits requiring payment to compete for a prize as part of an advertising scheme or sales promotion effort, and it excepts skill competitions that don't involve sales promotion. A paid chess tournament is fine in Maryland. A paid contest run to market a product is not. North Dakota, often listed as a flat ban on paid contests, requires disclosure rather than prohibiting them outright. Its prize notice statute, Century Code Chapter 53-11, permits pay-to-compete promotions once you deliver a written prize notice stating the sponsor's identity, each prize's retail value, the odds in plain numeric form, and any required payment, with the statement "YOU MUST PAY" and the amount in ten-point boldface type. An intentional violation is a felony, but a compliant sponsor can charge to compete in North Dakota.

State-by-state charts on sweepstakes marketing sites are unreliable in both directions on this topic. Some still describe Vermont's pre-2013 restriction a decade after the legislature repealed it. Others list North Dakota as a flat ban when it permits paid contests with proper disclosure. Sponsors who rely on those summaries end up dropping states that could remain in the promotion and charging fees in states that restrict them. Classification depends on statutory text, state by state, and there is no shortcut.

What an Entry Fee Can and Can't Do

An entry fee is lawful consideration only while the promotion is a true skill contest everywhere it operates. In State v. American Holiday Ass'n, 727 P.2d 807 (Ariz. 1986), the Arizona Supreme Court separated an entrance fee from a bet. A fee is unconditional, goes to the sponsor no matter who wins, and never becomes a stake the sponsor competes for, which is what makes a $50 barbecue cook-off entry different from a $50 wager. That distinction survives only as long as skill controls the outcome. Charge the same fee in a promotion with a random drawing anywhere in the winner selection, and it becomes consideration in a lottery. You can't draft around that result.

Design the contest first and price it second. Decide how winners will be selected, write judging criteria that leave chance no role including at a tie, check each state where the contest will operate against its statute rather than against a chart, and only then decide whether to charge. A national promotion must satisfy the most restrictive state's standard or exclude that state, and either choice belongs in your official rules before entries open.