Keeping the Skill in Skill Gaming – Removing Chance from Esports

As the Esports World Cup kicks off in Riyadh with record-breaking prize pools and global viewership, the competitive video game industry continues to solidify its role as a major player in the sports and entertainment ecosystem. Once limited to arcade showdowns over Donkey Kong and Pac-Man high scores, esports now fuels careers, commands media rights, and raises legal questions that didn’t exist 20 years ago.

One of the most critical, and often overlooked questions for developers, tournament organizers, and platforms: Is the game being played a game of skill or a game of chance? Many developers may not even consider this question, assuming that their game is obviously a game of skill, but as we will show in this article, it is not always that easy.

This distinction between skill and chance carries significant legal implications. It can determine whether a game falls under state gambling laws, whether it can be offered on certain platforms, and whether real-money tournaments can be lawfully hosted. In this article, we break down how U.S. law treats skill-based games, what tests courts apply, and how developers can mitigate the chance elements in their games to remain a game of skill.

Why the Legal Definition of “Skill” Matters

Historically and culturally, humanity has valued skilled based competition. High skill is seen as praiseworthy and part of a moral and healthy society. In contrast, many cultures see games of chance as evil, addictive, and harmful to society which requires banning or limiting their availability.

Esports titles are typically marketed and designed as skill-based competitions in the same vein as classic “mind sport” skill games such as chess. Players train for years to master timing, tactics, and execution. Still, nearly every game contains some element of chance, whether in the form of randomized item drops, dynamic spawn points, or unpredictable in-game events powered by a random number generator (RNG).

While these chance features may enhance gameplay, they also introduce legal complexity. In the U.S., gambling laws are primarily state-driven. Across all 50 states (and D.C.), chance-based gambling is either banned outright or tightly regulated. Conversely, games of skill are generally carved out of these restrictions. But determining whether a game is skill-based is not a matter of branding or perception, it’s a matter of legal classification.

How Courts Distinguish Skill from Chance

Courts and legislatures in the U.S. have developed three main legal tests to distinguish between games of skill and games of chance:

1. Predominant Factor Test

In this widely used standard, courts analyze whether skill or chance predominates in determining the outcome. If skill is the primary driver—typically meaning more than 50% of the result—the game is treated as a game of skill. This test tolerates some level of randomness but emphasizes competitive merit.

2. Material Element Test

This stricter test evaluates whether chance plays a material or significant role in determining results. Even if skill is important, a meaningful chance component could result in the game being treated as gambling.

3. Any Chance Test

This is the most restrictive approach. If any element of chance—however minimal—affects the outcome, the game may be classified as gambling. This test is rarely applied literally as it is arguable that every game contains at least a scintilla of chance.

Designing for Legal Clarity: How to Demonstrate Skill

If your game is intended for esports competition, particularly with paid entry and/or prize money, we recommend that an attorney who is familiar with online real money gaming is consulted as part of the development process, so that you know the legal risks as you are building your game to make the hard choices. This would also include proactively designing and documenting the ways in which the game satisfies skill-based legal standards. A high-level description of some best practices to consider are:

• Minimize Random Elements: Limiting luck-based mechanics.

• Avoid Pure Wagering Structures: Allowing players to bet on random events or outcomes that are not influenced by their own actions.

• Emphasize Player Decision-Making: Building gameplay that rewards strategy, timing, and execution.

• Implement a Rating System: Structuring competitive environments with a numerical rating and ranking system (e.g. the Elo rating system used for chess) can help demonstrate that player outcomes are tied to skill.

Use Opinion Letters to Show Legality

Once a game is designed with these elements in mind, developers and operators should consider obtaining a formal legal opinion letter assessing the game under relevant state gambling laws. These letters can:

  • Support onboarding with payment processors, app stores, or platform partners;

  • Serve as a due diligence tool for investors and licensors; and

  • Provide evidence of good-faith compliance in the event of a regulatory inquiry.

While an opinion letter is not a guarantee, it is a recognized risk-mitigation tool, especially in gray-area jurisdictions or when prize money is involved.

The Takeaway

As games continue to evolve and monetize, developers need to align game mechanics with the legal tests that govern skill-based gaming.

The presence of RNG or other chance-based mechanics may not disqualify a game outright as a game of skill, but failure to understand and document the chance elements could result in enforcement action, platform rejection, or reputational risk. With the right approach, esports developers can keep the “skill” in skill gaming and keep regulators at bay.

Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.

Brian Schaller & Max Landawesports, RMG