Skill Contests, Sweepstakes, and When You Can Charge to Enter

By Hank FasthoffJuly 3, 2026

An entry fee is lawful for some skill contests. The answer depends on how participants win, how the sponsor funds the prize, and the law of every state where entries are accepted. A paid promotion that awards a prize through chance may constitute an illegal lottery or another form of unlawful gambling.

A sweepstakes awards prizes by chance and uses a free method of entry to remove required consideration. A paid skill contest awards prizes through the skill identified in its rules. Labels don't control the classification. The rules and operation must establish how participant skill controls the result under each applicable state law, whether the competition involves cooking, photography, software development, business plans, trivia, or a mobile game.

States Apply Different Tests for Chance

Courts commonly use one of three tests to separate skill from chance. Under the predominant factor test, skill or chance must control the outcome. A material element test asks whether chance has a meaningful role even when skill has greater influence, while the any chance test treats every effect of chance as disqualifying.

In Dew-Becker v. Wu, 2020 IL 124472, paragraphs 22 through 28, 178 N.E.3d 1034, the Illinois Supreme Court described all three tests and adopted the predominant factor test. The court rejected the any chance test as too broad because every contest contains some degree of chance. It also rejected the material element test as too dependent on a subjective judgment about materiality. Illinois treated the one on one daily fantasy sports contest at issue as a bona fide contest of skill because participant skill predominated.

California also applies a dominant factor test. In In re Allen, 59 Cal. 2d 5, 6-7, 377 P.2d 280, 281-82 (1962), the California Supreme Court held that bridge could qualify as a game of skill even though the deal introduced chance. Participants repeatedly exercised judgment that ordinarily determined the outcome, and the court evaluated the character of the game instead of one player's ability.

New York requires attention to the statute governing the contest. Penal Law Section 225.00 defines a contest of chance as one whose outcome depends in a material degree on chance, even if skill is also a factor. New York separately enacted Article 14 of the Racing, Pari-Mutuel Wagering and Breeding Law to authorize and regulate defined interactive fantasy sports contests. In White v. Cuomo, 38 N.Y.3d 209, 221-28 (2022), the Court of Appeals upheld that framework under Article I, Section 9 of the New York Constitution. The court relied on participants' substantial influence over the results and on prizes that a neutral operator fixed and announced before play, independent of the number of entrants and the amount of entry fees. Article 14 doesn't supply a general exemption for other paid contests, which require analysis under the laws that govern their particular format.

Texas Separates Ordinary Contests From Gambling Devices

Texas Penal Code Section 47.01(1) defines a bet as an agreement to win or lose something of value solely or partially by chance. The definition excludes an offer of a prize, award, or compensation to participants in a bona fide contest for the determination of skill, speed, strength, or endurance. Attorney General Opinion GA-0926 concluded that an entry fee for an online quiz could fall outside the definition of a bet if the contest tested skill or speed and contained no chance.

Texas uses a separate definition for a gambling device. In State v. Gambling Device, 859 S.W.2d 519, 523 (Tex. App. Houston [1st Dist.] 1993, writ denied), the court held that a device could qualify when chance affected an award even though skill also influenced the result. Attorney General Opinion KP-0520 applied that device standard in June 2026 to a machine with a chance based initial mode and an optional skill based memory mode. Because chance affected whether a player received something of value, the attorney general concluded that the machine met the statutory definition of a gambling device.

Those device authorities construe Section 47.01(4), not the contest exception in Section 47.01(1). An ordinary paid contest requires its own analysis under the definition of a bet and the bona fide contest exception. Attorney general opinions provide advisory interpretations, while courts resolve disputed facts and control the final legal determination.

Judging Must Match the Promised Skill

Official rules must identify the skill being tested and explain how judges will score it. Subjective criteria such as creativity, originality, or visual appeal may support a skill contest when the rules define them, assign weights, and require judges to use the same score sheet for every eligible submission. The rules may also identify the judges or describe qualifications relevant to the promised evaluation.

Sponsors should preserve score sheets, tie decisions, and disqualification records. Those records document whether judges applied the published method. California Business and Professions Code Sections 17539.1 through 17539.3 regulate many contests conditioned on consideration. Among other requirements, the provisions prohibit misrepresentations about rules or odds, require specified disclosures and refunds, and require two years of records for covered contests. Section 17539.3 states that these provisions don't legalize conduct prohibited by another law.

Public voting requires defined safeguards. Audience appeal may serve as a stated criterion, but follower counts, purchased votes, bots, and coordinated voting may control the result unless the sponsor addresses them. The rules should state the vote's weight, impose voting limits, describe the response to suspected manipulation, and use a skill based method to resolve ties.

Random selection may change the contest's legal classification. A drawing among the highest scorers makes chance part of the final award even though skill determined who qualified. A paid promotion should award the prize under the disclosed skill criteria. If the sponsor uses a random final drawing, the promotion requires a separate sweepstakes analysis and a free method of entry where the law requires one.

Arizona provides a narrow statutory exception for certain intellectual contests. Under Arizona Revised Statutes Section 13-3301, the exception requires active participation, restricts control of the outcome by anyone other than the players, and bars the use of prizes as a lure to separate players from their money. Payment must be part of an established product price without an added increment for the contest, and no drawing or lottery may determine the winner. A sponsor relying on that exception must complete the filings required by Section 13-3311, including advance registration and a report identifying the winners within 10 days after the prizes are awarded.

An Entry Fee Differs From a Wager

Courts may distinguish a contest entry fee from a bet by examining who competes for the money and how the sponsor funds the prize. In State v. American Holiday Association, 151 Ariz. 312, 727 P.2d 807 (1986), the Arizona Supreme Court held that fees charged by a sponsor that didn't compete weren't bets. Contestants competed for guaranteed prizes that didn't depend on the number of entries or the fees collected. The sponsor deposited fees into its general account and bore the risk that the contest would lose money.

The New York Court of Appeals drew a similar distinction in White. A fixed prize offered by a neutral sponsor differs from a pool composed of participants' stakes and awarded to one or more participants. The court treated predetermined prizes, announced before the contest and unaffected by entry volume, as part of the lawful interactive fantasy sports structure before it.

Prize funding therefore requires separate review from the method used to select a winner. A sponsor that guarantees a $10,000 prize before entries open has a different structure from one that uses entry fees to compose the prize pool. Fantasy sports, esports tournaments, poker adjacent formats, and other competitions may pool fees and pay the pool to winners. When participants fund the award for which they compete, the payment more closely resembles a wager than a fixed entry fee paid to a neutral sponsor.

Before entries open, the sponsor should set and guarantee each prize, keep its value independent of entry volume, and describe the payment as an entry fee instead of a pot, wager, or stake. A budget may account for expected fee revenue, but the obligation to award the prize should exist independently of the fees collected.

State Statutes Impose Additional Restrictions

State statutes may govern the fee, the promotion's sales purpose, the sponsor's business model, or required disclosures even when skill controls the winner. A lawful design requires both the gambling analysis and compliance with these separate promotion rules.

Vermont Title 9, Section 2481x states that its consumer protection chapter doesn't prohibit an entry fee, service charge, purchase, or similar consideration for a game of skill or another promotion that isn't based on chance. The section doesn't displace other Vermont laws that may govern the contest.

Maryland Commercial Law Section 13-305 restricts specified prize notices used in advertising or sales promotion when the recipient must buy goods or services, pay money to participate, or submit to a sales effort. The section excludes games of skill that don't involve sales promotion. A paid contest tied to selling a product or service therefore requires analysis beyond whether skill determines the winner.

North Dakota Century Code Chapter 53-11 requires a written prize notice before a covered sponsor requires payment to compete for a prize. Required disclosures include the sponsor's identity, prize value, odds, restrictions, and payment in prescribed type. Section 53-11-05 makes its remedies cumulative, so compliance with the notice chapter doesn't replace the gambling analysis.

Louisiana Revised Statutes Section 14:90 defines gambling to include conducting as a business a game, contest, lottery, or contrivance in which a person risks something of value to realize a profit. The text doesn't state a chance element, and the statute lists specific exceptions for authorized activities. A sponsor accepting paid entries from Louisiana requires a state specific analysis rather than an assumption that skill alone resolves the issue.

The Prize, Fee, and Winner Selection Require One Design

Every step that may affect who wins or how much the winner receives should appear in the legal review. That review includes question selection, seeding, judging criteria, public voting, advancement, ties, disqualifications, prize allocation, and any algorithm used during play. A random choice at any stage may change the classification under a strict state law.

Official rules should state the fee, refund terms, judging criteria and weights, judge qualifications, tie procedure, prize amount, and award timing. The sponsor should then compare that design with the gambling and promotion statutes in every state where entries will be accepted. Skill may support a paid contest, but the mechanics, prize funding, and state eligibility rules determine whether the sponsor may charge the fee.