New Jersey Redefines Permissible Types of Pay-to-Play Skill Contests

New Jersey recently amended its law on skill contests, [enhanced version available to lexis.com subscribers]. The new law defines the types of skill contests where a payment can be required to enter. This change could affect operators of video game tournaments, fantasy sports leagues, or other competitions historically viewed as skill-based (and therefore allowed to charge for entry) but which do not fit directly within the new statutory definition of a “contest of skill.”

Contest of Skill Narrowly Defined

The new law defines contest of skill as “any baking or photography contest, and any similar contest that is approved as a ‘contest of skill’ by the Attorney General, provided that the winner or winners are selected solely on the quality of an entry in the contest as determined by a panel of judges using uniform criteria to assess the quality of entries.”

Potential Problems for Various Types of Contests

The new definition of contest of skill presents a challenge for anyone who has been offering skill-based contests in New Jersey where (a) a payment is required to enter, but (b) the format of the contest is different from a traditional baking, photography, essay or other contest where entries are judged by a panel of judges based on quality. Examples could include trivia contests, athletic competitions, video game tournaments and fantasy sports leagues, to name a few. Online video or photo contests with public voting as a deciding factor (or the only factor) would also be called into question, at least if a purchase or other payment is required for entry, which is sometimes the case but not usually. While the option exists to seek approval for such contests from the Attorney General, it is not clear that the Attorney General has discretion under the statute to approve any format not based on judging by a panel of judges.

Potential Implications for Pay-to-Play Contest Operators

It seems that the intent of the law is to broaden the category of permissible pay-to-play skill contests by removing a theoretical doubt as to the legality of all such programs under prior New Jersey case law. The actual effect, however, may be the opposite given the narrow definition of the protected contests which, as noted above, excludes some types of the contests historically offered by many sponsors in New Jersey and a number of other states under the theory that an entry fee was permissible as long as any form of skill (not just panel-judged skill) determined the winners.

For the moment, there is no apparent intent by New Jersey officials to restrict the operation of pay-to-play skill contests which have been running in that state. Until the law is clarified in New Jersey, however, anyone offering a pay-to-play, skill-based contest where winners are selected on a basis other than panel-based judging should pay close attention and possibly consider voiding the contest in New Jersey as the more conservative position.

The text of the law is available here.

This GT Alert was written by Ed Chansky and Erica Okerberg in Greenberg Traurig’s Las Vegas office. Questions about this information can be directed to:

>  Ed Chansky | +1 702.599.8016 | chanskye@gtlaw.com

>  Erica Okerberg | +1702.599.8073 | okerberge@gtlaw.com

>  Or your Greenberg Traurig attorney

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