The short answer is most likely not. The long answer is it depends.
There are a number of factors that affect whether you’ll need a permit, licence or authority to run a competition. The most important factors that will determine your competition licence requirements are: which countries your competition is open to and whether your competition is a true game of skill or not.
Let’s dive in.
First of all – here’s the difference between a game of skill and a game of chance.
To understand whether you’ll need a licence or permit for your competition, contest or giveaway; you’ll first need to understand whether you’re running a game of chance competition or a game of skill competition.
A game of chance is a competition that doesn’t require any skill to enter, skill plays no part in determining the winner and the winner is picked at random. Examples of games of chance are enter your email to win, follow to win or purchase to win. In each of these instances, no skill is required and the winner is picked at random from all eligible entries.
A game of skill, on the other hand, requires the entrant to show some form of skill, or consideration, in their entry. An entrant will submit an original and unique entry in exchange for a chance to win. The big difference between a game of chance and a game of skill is that the winner of a game of skill is chosen based on the skill they demonstrate in their entry.
You can read a full run down of the difference between games of chance vs games of skill here:
Is your competition a true game of skill?
As we saw above, the difference between a game of chance and a game of skill is pretty clear cut. If skill is involved, it’s a game of skill. If not, it’s a game of chance.
But what about competitions, contests or giveaways that combine chance and skill?
Some competitions may require, for example, a name, email address and an answer to a question. You may think that including the need to answer a question makes your competition a game of skill and you can therefore dodge the licence requirements, but this isn’t strictly true.
Whether your competition is a true game of skill or a game of chance masquerading as a game of skill depends largely on how you will choose and award your winner.
Let’s take the example above, where you’re collecting a name, email and answer to a question to see what I mean.
If you are going to pick your winner at random from everyone who enters; your competition is a game of chance even though there was a question as part of the entry process. Remember, if you’re choosing your winner at random and not by skill, it’s a game of chance.
Let’s assume your question is ‘what colour is the sky?’. If you are going to look at all the answers, filter out incorrect answers, then pick your winner only from the entrants that guessed the correct answer, your competition is still a game of chance. It doesn’t matter that your entrants showed the ‘skill’ of guessing the correct colour (or the “skill” of looking out of a window…), you are still choosing your winner at random from the correct answers, therefore you are running a game of chance.
Now let’s assume your question was ‘tell me your favourite bedtime story’. If you are going to pick a winner at random from everyone who submitted a story, your competition is a game of chance. If you read through all of the answers, pick your ten favourite bedtime stories, then pick your winner at random from these top ten, your competition is still a game of chance.
The only way this competition could be considered a game of skill is if you read through every single entry/story and choose a winner based on their answer to the question alone. This would be a game of skill because the skill the entrant showed in telling their story is the skill by which you are awarding them a prize.
It’s important to ensure you’re running a true game of skill. If your competition is not truly a game of skill, you are running a game of chance and running a game of chance without a licence can result in hefty fines or even prison time in some states, territories or countries.
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In Australia, you do not need a licence or permit for a game of skill.
If your competition is a true game of skill, where entrants submit unique entries that require them to demonstrate some form of skill; and you then choose the winner based on the skill shown, then you do not need a licence, permit or authority to run this type of competition open to residents of any state or territory in Australia.
For competitions open to other countries, you will need to seek advice from law firms based in those countries. Each and every country has a number of laws, regulations and bodies that oversee the running of promotions and each country has unique requirements for the registering or ‘filing’ of competitions; rules around what is and isn’t permitted and criteria for whether you will or will not need to apply for licences and permits.
If you’re planning on running a competition, specifically a game of skill competition, your first step to determining whether you will need a licence or permit, is to ensure your competition is a true game of skill. Check that your entry method is skills-based and that you will be choosing your winner based on the skill they demonstrate in their entry and not at random, or by chance. Once you determine whether your competition is a true game of skill, you will need to check the licensing laws and permit requirements in the countries your competition is open to (not just the country where your business is based). For us Australians, you currently do not need a licence, permit or authority to run a true game of skill in any state or territory.