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

By Hank FasthoffJuly 3, 2026

You can charge an entry fee for some skill contests. Whether you can charge depends on how participants win, how you fund the prize, and every state where you accept entries. When you charge for a chance-selected prize, consideration may complete an illegal lottery. You may charge for a bona fide skill contest under some state gambling laws, but the answer changes with the statute and the contest design.

In a sweepstakes, you select winners by chance and provide a free method of entry that removes required consideration. In a paid contest, you award prizes through the skill described in your rules. Your rules and operation must show how a participant's skill controls the result under each applicable state law, whether you're running a cook-off, photography competition, hackathon, business plan contest, trivia tournament, or app-based game.

States Test Chance Differently

Courts commonly use one of three tests to separate skill from chance. Under a predominant factor test, courts ask which factor controls the outcome. Under a material element test, they ask whether chance has a meaningful role even when skill carries more weight. Under an any-chance test, courts can classify a paid game as gambling when chance affects the result at all.

In Dew-Becker v. Wu, 2020 IL 124472, ¶¶ 22-28, 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 and the material element test as too dependent on a subjective judgment about materiality. Illinois then treated a head-to-head daily fantasy sports contest as a contest of skill because the participants' 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, because participants repeatedly exercised judgment that ordinarily determined the outcome. The court evaluated the character of the game, rather than the ability of one particular player.

A New York promotion requires a two-track review. Penal Law Section 225.00 defines a contest of chance by asking whether chance affects the outcome to a material degree. In White v. Cuomo, 38 N.Y.3d 209, 221-28 (2022), however, the Court of Appeals used a dominant-element analysis for the state constitution and upheld legislation authorizing defined fantasy sports contests. A contest can satisfy Article I, Section 9 of the New York Constitution while raising risk under Penal Law Section 225.00. The court in White also relied on fixed prizes announced before play and independent of the number of entrants or fees collected.

In Texas, you need a stricter design. Attorney General Opinion GA-0926 (2012) concluded that, if a contest is in fact one of skill or speed and contains no element of chance, a court could conclude that an entry fee for an online quiz falls outside the Penal Code's definition of a bet. State v. Gambling Device, 859 S.W.2d 519, 523 (Tex. App. Houston [1st Dist.] 1993, writ denied), likewise held that a device can qualify as a gambling device when chance affects the award even if skill also influences the result.

Texas Attorney General Opinion KP-0520 applied that rule in June 2026 to a machine with an initial chance-based mode and a subsequent skill-based mode. The opinion concluded that the machine qualified as a gambling device because chance affected whether a player received something of value. Texas attorney general opinions state the attorney general's legal interpretation, but courts retain final authority. If a skill round follows a chance-based award, you should treat the award as chance based.

Your Judging Method Shows Whether Skill Controls

Your official rules should define the skill being tested and explain how judges will score it. Subjective criteria such as creativity, originality, or visual appeal can work when you define them, assign weights, and use the same score sheet for every eligible submission. You can also identify the judges or describe their qualifications when those qualifications support the promised evaluation.

You should preserve score sheets, tie decisions, and disqualification records. You can use those records to show that judges applied the published method instead of selecting a preferred entrant after reviewing the field. California's Business and Professions Code Sections 17539.1 through 17539.3 require extensive disclosures and records for many paid contests and prohibit misrepresentations about contest rules. Section 17539.3 states that those provisions don't legalize conduct prohibited by other law.

If you use public voting, you need a more precise design. You can measure audience appeal when your rules make audience appeal a stated criterion, but follower counts, purchased votes, bots, and coordinated voting can determine the result. You should disclose the vote's weight, set voting limits, reserve a documented fraud-review process, and use a skill-based method for any tie.

Random selection creates the greatest risk. A drawing among top scorers makes chance control the final award even though skill determined who qualified. For a paid promotion, you should either award the prize through the disclosed skill criteria or remove the required payment and structure the final drawing as a compliant sweepstakes.

Arizona defines a narrow intellectual-contest exception. It applies only when payment forms part of an established product price, no increment is added for the contest, and no drawing or lottery selects the winner. Arizona Revised Statutes Section 13-3311 also requires covered operators to file rules that include tie procedures. That exception won't help most standalone paid contests. A subsequent judging round, a defined tiebreaker question, or a split prize can resolve a tie without random selection.

An Entry Fee Differs From a Wager

Some courts distinguish a contest entry fee from a bet by examining who competes for the money and how the sponsor sets the prize. In State v. American Holiday Ass'n, 151 Ariz. 312, 727 P.2d 807 (1986), the Arizona Supreme Court held that reasonable fees charged by a noncompeting sponsor weren't bets where contestants competed for guaranteed prizes that didn't depend on the number or amount of fees received. The sponsor deposited fees into its general account, guaranteed the announced prizes, and bore the risk that the contest would lose money.

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

Prize funding deserves its own review. A contest where the sponsor guarantees a $10,000 prize before entries open differs from one where entrant fees create the prize pool. Fantasy sports, esports tournaments, poker-adjacent formats, and hackathons often pool fees and pay that pool back to winners. If participants fund the prize they compete for, the fee starts to look more like a wager than a fixed entry fee paid to a neutral sponsor.

Before entries open, you should set and guarantee each prize, keep its value independent of entry volume, and describe the participant's payment as an entry fee instead of a pot, purse, wager, or stake. Your budget can account for expected fee revenue, but your obligation to award the prize should exist independently of the fees you collect.

State Statutes Set Separate Restrictions

State-specific rules can govern the fee, the promotion's sales purpose, the sponsor's business model, or the required disclosures even when skill controls the winner. You need both parts of the analysis before you accept paid entries.

Vermont's Title 9, Section 2481x states that its consumer-protection chapter doesn't prohibit entry fees, service charges, purchases, or similar consideration for a game of skill or another promotion that isn't based on chance. Vermont enacted the section in 2013 after an earlier restriction, but other Vermont laws require a separate review.

Maryland Commercial Law Section 13-305 bars certain prize notices used in advertising or sales-promotion plans when the recipient must buy goods or services, pay to participate, or submit to a sales effort. The section excludes skill competitions that don't involve sales promotion. Because Maryland ties the exception to sales promotion, you should analyze a branded paid contest differently from a freestanding tournament.

North Dakota Century Code Chapter 53-11 requires a written prize notice before a sponsor charges someone to compete for a prize. Among other disclosures, the notice must state the sponsor's identity, prize value, odds, restrictions, and the required payment in prescribed type. Section 53-11-05 makes those remedies cumulative, so you must also comply with North Dakota's gambling statutes.

Louisiana Revised Statutes Section 14:90 defines gambling to include conducting as a business any game or contest in which a person risks something of value to realize a profit. The statutory text doesn't recite a chance element, but Louisiana authority discusses chance in lottery and device contexts, and the state's gambling framework contains separate exceptions for particular authorized activities. If you plan to accept paid entries from Louisiana, you should obtain a state-specific analysis instead of assuming that a skill determination resolves the issue.

Decide the Prize Before You Set the Fee

You should map every step that can affect who wins or how much the winner receives. That review should cover board generation, question selection, seeding, judging criteria, public voting, advancement, ties, disqualifications, prize allocation, and any algorithm used during play. A random choice at any of those points may change the legal classification in a strict state.

Your rules should state the fee, refund terms, judging criteria and weights, judge qualifications, tie procedure, prize amount, and award timing. You should then compare that design with the gambling and promotion statutes in every state where you'll accept entries. Skill can support a paid contest, but your mechanics, prize funding, and state eligibility determine whether the fee belongs there.