What is the difference between a game of skill vs game of chance?
A trade promotion is:
1. a free entry competition;
2. to promote goods or services; and
3. conducted by a registered business
Trade promotions are a great way to increase brand awareness, increase sales, and promote brand loyalty.
What is a game of chance?
A game of chance is a game whose outcome is determined purely by chance. For example, it would be considered a game of chance if winners are determined by a random competition draw or a scratch and win mechanic, where no skill is involved in determining a winner.
So What is a Game of Skill?
A game of skill is a game where the outcome is determined purely by skill rather than chance. For example, it would be considered a game of skill if an entrant is judged on creative merit or based on their mental or physical skill in a competition challenge.
Games of chance and games of skill can be utilised by businesses to create incentives for customers, to drive purchases and increase brand loyalty. There are benefits to both kinds of trade promotions, and both will require full competition terms and conditions. However, there are key differences to the requirements of each.
Game of skill vs Game of chance
The laws and regulations for trade promotions are governed by states and territory legislation. Therefore, each individual state and territory must be considered when planning a trade promotion and writing competition terms and conditions.
Games of skill do not require permits in any state or territory; however, they must still comply with the regulatory requirements.
Depending on the prize pool and whether the promotion is run, games of chance may require trade promotion permits in:
- ACT; and
NT may also require a permit if one is not received in any of the other states or territories with trade promotion competition permit systems.
Duration based authorities have replaced trade promotion permits in NSW. A business can apply for a 1, 3 or 5 year authority, which will cover all promotions with a prize pool over $10K. To run a promotion with a prize pool over $10K under an authority, the promotion terms and conditions must be submitted to NSW Fair Trading via the portal at least 10 days before the start date.
To apply for a Trade Promotion permit or submit a notification under an authority, the full competition terms and conditions will need to be drafted for your game of chance, in accordance with the state and territory trade promotion regulatory requirements. Notably, the requirements are more extensive for games of chance, with varying state and territory requirements for conducting the prize draw, notifying winners, publishing results, and awarding unclaimed prizes.
Once the game of chance competition terms are submitted to the departments, approval can take up to 14 days, and therefore it is best to plan in advance for game of chance competitions, to ensure there is sufficient time to draft the competition terms and receive the necessary approvals. Permit fees will also apply, depending on the total prize pool.
Although more involved, games of chance are known to promote sales, if entry in the prize draw is dependent upon purchasing a product.
If costs and timings are tight, a game of skill may be a great option, as generally the state and territory requirements are less arduous, and therefore the competition terms are much simpler. Games of skill are also a great way to engage customers with a brand, due to the creative and challenging nature of the entry mechanics. For example, entrants may be invited to take a creative photo, with the winning entries being published on the Promoter’s website.
Both games of chance and games of skill have a host of benefits for brands, and which option is taken will largely depend on the promotion strategy, as well as budget and timings.
To summarise, the main differences between games of chance vs games of skill are as follows:
- games of chance are determined purely by chance;
- games of skill are determined purely by skill;
- both games of chance and games of skill require full competition terms to be drafted;
- the regulatory requirements for each differ, depending on State/Territory requirements;
- games of chance may require competition permits in SA or ACT, and may need to be approved under an authority in NSW.