Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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If you’re building a startup that involves challenges, leaderboards, tournaments, or “win a prize” mechanics, you’ve probably asked yourself a deceptively simple question: is this a game of skill, or is it gambling?
In Australia, that question matters a lot. Your classification can affect whether you need permits, what you can advertise, how you handle entry fees, and how you draft your rules. It also affects customer trust - and the risk of complaints to regulators if someone believes your game is “really” a game of chance.
This guide is written for small businesses and startups designing or running games of skill in Australia (online or offline). We’ll walk through the key legal risks, the compliance areas that commonly trip up founders, and the practical documents you should have in place before you launch.
This article is general information only and does not constitute legal advice. Because gambling and promotion rules vary across Australia (and can change), you should get advice on your specific mechanics and where your users are located before launch.
What Counts As A “Game Of Skill” In Australia (And Why It’s Not Always Clear)
“Games of skill” is a popular phrase, but it’s not a single, universal legal category across Australia. Different rules can apply depending on:
- Whether you’re charging an entry fee (or requiring a purchase)
- Whether prizes are involved (cash, products, subscriptions, vouchers)
- Where your participants are located (each State/Territory has its own gambling, lotteries and trade promotion framework)
- How your game actually works (including hidden randomness, tie-breakers, and selection processes)
Skill Vs Chance: The Practical Test Founders Should Use
Generally, a game is closer to a “game of skill” where the outcome is determined mainly by the participant’s skill, knowledge, judgement, or ability - not random chance.
But startups get caught out because a product can be marketed as “skill-based” while still including chance-like features, such as:
- Randomised loot drops or mystery rewards that impact scoring
- Luck-based matchmaking that materially affects outcomes
- “Random winner from top 100” mechanics
- Random tie-breakers (rather than skill-based tie-breakers)
- Winner selection by draw rather than by performance
If chance plays a meaningful role, you can slide into a regulated promotion or gambling-like activity - even if your game includes skill elements.
Entry Fees Change The Risk Profile
One of the biggest risk multipliers is charging money to enter. When people pay to participate for the possibility of winning a prize, regulators tend to look more closely at whether the activity resembles gambling.
That doesn’t mean every paid entry is unlawful - but it does mean your rules, disclosures, and mechanics need to be thought through carefully before you take payments.
Common Legal Risks For Startups Running Games Of Skill
Startups often focus on product and growth first. That’s understandable, but games of skill tend to touch multiple legal areas at once. Here are the risks we most often see.
1. Misclassification: Accidentally Running A Regulated Promotion Or Gambling Activity
If your “skill” game is actually determined by chance (or even partly by chance in a material way), you may trigger legal requirements that you haven’t built for - such as permits for certain types of trade promotions or lotteries in some jurisdictions, required disclosures, or restrictions on how you run and market the promotion.
Importantly, a genuine game of skill (where skill truly determines the outcome) is generally treated differently from a game of chance. Permit requirements are more commonly an issue for trade promotions, lotteries and draw-style mechanics - particularly where chance determines winners - rather than for pure skill competitions.
This is where founders can end up stuck: you’ve already built the product, users are entering, and then you realise you need to rework the mechanics or pause a campaign.
2. Marketing Claims That Overpromise Or Mislead
Even if your game is genuinely skill-based, your advertising still needs to be accurate. Statements like “guaranteed win”, “easy money”, “everyone gets paid”, or unclear prize descriptions can create Australian Consumer Law (ACL) issues.
You should also be careful with how you describe odds, rankings, eligibility, and how winners are selected - especially if your algorithm or scoring method is complex.
3. Unclear Rules (And Disputes When People Lose)
Where there’s a prize, there’s usually someone unhappy about not winning it.
If your rules don’t clearly address:
- how scoring works
- who is eligible
- how you handle cheating or multiple accounts
- what happens if the platform glitches
- how ties are resolved
- when prizes are delivered
…you can end up with messy disputes, refund demands, reputational damage, and platform complaints.
4. Payments, Refunds, And Chargebacks
If you take entry fees or in-app purchases connected to competitive outcomes, you need a clear position on refunds and cancellations. You also need payment terms that are fair, transparent, and compliant.
Even if your game is “just for fun”, if it involves payments, subscriptions, or digital items, you still need to manage consumer expectations carefully under the ACL.
5. Privacy And Data Security Risks
Games collect data - sometimes a lot of it. Even a simple competition can involve names, emails, ages, IP addresses, device identifiers, and behavioural data.
If you’re collecting personal information, you’ll usually need a Privacy Policy and privacy-compliant user journeys (including how you collect, use, store, and disclose information).
Do You Need Permits Or Approvals For Games Of Skill?
This is where things get jurisdiction-specific, and also where “games of skill” can overlap with other regulated categories.
As a general rule of thumb, pure skill competitions are less likely to require permits than games of chance. The risk usually increases if your mechanics include any random winner selection, draw-style elements, or chance-based tie-breakers - or if the competition is structured as a marketing promotion connected to sales.
Games Of Skill Vs Trade Promotions
Some activities that feel like “skill contests” can still be treated like promotional competitions depending on the structure (for example, where the outcome isn’t purely skill-based, or where the promotion is connected to a product purchase).
If your campaign looks like a giveaway or promotion to drive sales, you should understand the compliance expectations around giveaway laws before you launch marketing.
Games Of Skill Vs Raffles And Draw-Style Mechanics
If you’re selecting winners by random draw (even if entry requires completing a task), you may be moving away from a pure game of skill.
Raffles and other draw-style promotions have their own rules and can require permits depending on where you operate and who is eligible. If your “skill” concept includes any draw element, it’s worth understanding how raffle laws can apply in practice.
Online Startups: You’re Probably Operating Nationally
If your game is online, participants may enter from multiple States and Territories. That can complicate compliance, because rules can differ by jurisdiction - and your terms should be clear about eligibility and location restrictions (if any).
For many startups, the safest approach is to design the promotion/game structure and rules to meet the strictest likely requirements, and clearly limit entry if you can’t comply everywhere.
Key Compliance Areas You Should Build Into Your Product (Not Bolt On Later)
Legal compliance is much cheaper when it’s part of your design stage. Here are the areas we recommend you treat as “product requirements”, not afterthoughts.
Australian Consumer Law (ACL): Your Claims, Prizes, And User Experience Must Match Reality
If you’re offering prizes, subscriptions, digital rewards, or paid entry, you’re operating in a consumer-facing environment. Under the ACL, you need to avoid misleading or deceptive conduct and ensure your advertising is accurate.
This comes up in practical ways, such as:
- clearly describing prizes (including any conditions, expiry, or limitations)
- not implying everyone will win if that’s not true
- being upfront about paid entry requirements
- handling complaints and refunds fairly
If your startup also sells goods or bundles prizes with products, you should have your team across consumer guarantees and warranty messaging, including how long consumers can expect products to last (for example, Australian Consumer Law warranty expectations can be misunderstood if your marketing oversimplifies “2-year warranties”).
Privacy And Data: Collection Notices, Marketing Consent, And Security
If you’re collecting emails for a leaderboard, sending winner announcements, or running promotional campaigns, privacy and marketing compliance matter.
Common requirements you should plan for include:
- a clear privacy position (what you collect, why, where you store it, who you share it with)
- consent flows for email/SMS marketing
- age gating (especially if minors may participate)
- internal processes for deleting data, responding to complaints, and handling breaches
If you’re building a mailing list, referral program, or automated email sequences, email marketing laws are particularly important to get right early (because non-compliant campaigns can attract complaints quickly).
Intellectual Property: Protect Your Game, Brand, And Content
Games of skill often involve strong branding: a memorable game name, logo, character art, UI designs, and original content.
From a practical startup perspective, it’s worth thinking about:
- brand protection (so a competitor can’t ride on your reputation)
- ownership of code and assets (especially if you use contractors)
- permissions for music, images, and third-party content
If you’re building a brand you want to scale, registering your trade mark is often one of the most valuable early steps to protect your name and logo. You can read more about how to register your trade mark.
Unfair Terms And “One-Sided Rules” In Your User Terms
Startups sometimes draft rules that give them broad rights to change anything, cancel prizes, or ban users without process. While you do need protections against fraud and misuse, your terms should still be fair and clearly explained.
If your terms are too one-sided, you can increase legal risk (and also customer backlash). A well-drafted set of user terms helps you balance both: protecting your platform while staying transparent with users.
What Legal Documents Should A Games Of Skill Startup Have?
Most legal issues in games of skill come back to two things: unclear rules and unclear relationships. The right documents help fix both.
Depending on your business model, you should consider the following documents.
- Game Rules / Competition Rules: Clear rules that explain eligibility, entry steps, how winners are determined, cheating rules, disqualification rights, and prize delivery timeframes. For many startups, this is best handled as tailored Competition Terms & Conditions.
- Website Terms: If you operate a website or platform, Website Terms and Conditions can set the ground rules for account use, acceptable behaviour, disclaimers, limitation of liability (where appropriate), and platform availability.
- Privacy Policy: If you collect personal information (even just emails), a Privacy Policy explains how you handle that data and supports trust with users, partners, and payment providers.
- Contractor / Developer Agreements: If you hire developers, designers, or marketers, your agreements should clearly cover IP ownership, confidentiality, deliverables, and payment terms.
- Sponsorship Or Partner Agreements: If brands provide prizes or co-market with you, you’ll want a written agreement on who supplies what, approval rights, timelines, and who carries risk if something goes wrong.
- Founder Documents: If you have co-founders or plan to raise investment, setting up correctly matters. This can include company set up decisions and clear allocation of roles, equity, and decision-making.
A Quick Note On “Templates”
It’s tempting to copy rules from a competitor or use a generic template, especially when you’re moving fast.
But with games of skill, small wording changes can have big consequences (for example, a tie-breaker clause or winner selection clause can shift your entire risk profile). Tailoring your documents to your exact mechanics is one of the best ways to reduce disputes and regulatory headaches later.
Key Takeaways
- “Games of skill” can still create legal risk if chance plays a meaningful role in outcomes, especially where prizes and entry fees are involved.
- Online games and promotions often operate across multiple States and Territories, so eligibility rules and compliance planning need to reflect that reality.
- Consumer law risk usually shows up through unclear prize descriptions, overconfident marketing claims, and disputes about fairness or refunds.
- If you collect participant data, you’ll likely need privacy-compliant user journeys and documents like a Privacy Policy and appropriate marketing consent processes.
- Strong, tailored rules and platform terms are a practical risk-management tool - they reduce disputes, help you respond to cheating, and keep promotions transparent.
- Protecting your brand and content early (including trade marks and IP ownership clauses in contractor agreements) can prevent expensive issues as you scale.
If you’d like a consultation on launching or scaling a games of skill startup, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
