Knowledge and skill games from the perspective of the Gambling Act

Have you ever thought about organising tournaments for profit in various card games, board games, online games such as FIFA, Pro Evolution Soccer, Dota, or other similar games with skill elements, where players compete against each other for prize money? If you have thought of a similar idea, we recommend you to evaluate very carefully whether your intention to do so falls under the regulation of Act No. 186/2016 Coll., on Gambling (hereinafter referred to as the "Gambling Act").

While it is true that the regulation of the Gaming Act does not generally apply to so-called knowledge and skill games, in many cases it will be quite difficult to determine whether or not a game will fall into this category of games.

Author of the article: ​ARROWS (Mgr. Ondřej Cicvárek, office@arws.cz, +420 245 007 740)

This article was written in 2021. If you are looking for the latest information on this topic, please contact us at office@arws.cz or by phone on +420 245 007 740. We will be happy to advise you.

Characteristics of knowledge and skill games

Knowledge games can be defined as the type of games whose outcome is determined by the breadth of the player's knowledge. For example, the popular television competition 'Want to be a Millionaire', in which the contestants were asked to answer a predetermined set of questions, the difficulty of which gradually increased as the game progressed, can be described as a knowledge game. Depending on the number of questions answered correctly, the contestant could subsequently win a cash prize in the order of several thousand crowns up to the higher units of millions.

Skill games are then those in which the outcome is determined by the individual skills of each player. In skill games, the outcome of the game depends, for example, on the speed of the player's reactions, his combination skills or strategic skills. This category of games can include, for example, the game of go, chess, paintball, etc.

In practice, we will often encounter games that combine both knowledge and skill elements. As mentioned above, pure knowledge and skill games (sometimes also referred to as skill games) are generally not considered gambling by gaming law. However, it is important to bear in mind that not every game in which a knowledge or skill element is present, even to a very high degree, automatically falls into the category of knowledge or skill games.

The difference between games of chance and games of skill

The Gaming Act defines a game of chance in section 3(1) as a game, wager or lottery in which the bettor places a bet, the return of which is not guaranteed, and in which the winning or losing is determined wholly or partly by chance or an unknown circumstance. Thus, the basic characteristics of a game of chance include:

• a bet whose return is not guaranteed;
• the possibility of winning; and
• the existence of a chance or unknown circumstance determining the win.

In addition to these features, the nature of the game, the intended purpose of the game, whether the game is intended for a limited number of players or whether the general public will be able to participate in the game and a number of other necessary criteria must also always be assessed.

In general, however, it can be summarised that where a game fulfils all three of the above characteristics (i.e. the element of stake, chance and the possibility of winning), there is a risk that such a game will be regarded as gambling by the supervisory authorities.

Whether the definitional elements of a game of chance are met can be illustrated by the following example. Imagine that you want to organise a small poker tournament every Saturday for a maximum of 16 players, open to any member of the public. You will collect an entry deposit of CZK 1,000 from each player as a condition for participation in the tournament. From the entry fee, which in the case of the number of players thus determined will be a total of 16.000,- CZK, you will keep 4.000,- CZK for yourself as a reward for organizing the tournament, and the remaining 12.000,- CZK will serve as the main prize for the winner of the tournament. The question in this case is, is it gambling within the meaning of the Gaming Act?

The payment of the initial deposit, by which the player has secured the opportunity to participate in the tournament, fulfils the first characteristic of a gambling game, i.e. the placing of a bet (deposit), the return of which is not guaranteed. It is clear from the tournament rules that, once an entry stake has been placed, the tournament participant is not able to request the organiser to return his stake. Given that each participant has the opportunity to win a total of CZK 12,000 in the tournament, the second characteristic defining a game of chance, i.e. the possibility of winning, is also fulfilled.

If the prize were to be decided by chance or an unknown circumstance, all the defining features of the so-called operation of a gambling game under Section 5 of the Gaming Act would be fulfilled, with the result that it would be necessary to assess whether the operation of this type of tournament is not contrary to valid and effective legislation.

The element of chance or unknown circumstance in the game

A typical example of a coincidence or unknown circumstance in a game may be the drawing of a certain number, the stopping of a ball on a certain number of a roulette wheel or the generation of identical symbols on a slot machine. In general, the element of chance can be found in all games where the player does not have the outcome of the game entirely in his or her hands, i.e. wherever the player has no objective way of influencing, predicting or otherwise determining the outcome of the game.

It is true that chance need not be present in a majority proportion of the game, but its proportion must nevertheless have some weight. Randomness or unknown circumstance can thus be found wherever it plays a not insignificant role.

In terms of the extent to which the player's knowledge and skill influence the outcome of the game and the extent to which chance influences the outcome, there are three basic categories of games: (i) games based on a random process; (ii) games based on a random process influenced by knowledge or skill; and (iii) games based on a combination of chance and knowledge or skill.

In cases where the player's knowledge or skill combined with an element of chance is involved in winning or losing, the effect of both elements on the outcome of the game, or on the possibility of winning itself, must always be carefully weighed. Only games where the outcome of the game is either not affected by chance at all or where the outcome of the game is affected by chance, but only to a very minor extent, will be allowed to be operated without the authorisation of the competent authorities.

In the case of the above example of a poker tournament, the winner is the player who is able to defeat all his opponents consecutively. Although the vast majority of amateur and professional players consider the game of Poker Texas Hold'em to be a game in which psychology, discipline or mathematical skills of the players play a major role, the courts of the Czech Republic consider this card game to be a game of chance, subject to legal regulation, since the element of chance is, in the opinion of the Czech courts, an integral part of the game.

Conclusion

It follows from the foregoing that if you wish to operate any game which you believe meets all the attributes of a game of skill or knowledge, it is nevertheless advisable to consider the situation carefully and consult an expert, because although it may not appear so, a certain degree of chance can be found in the vast majority of all possible types of games, whether card, board or computer games. If you do not do so, you run the risk of unauthorised gambling on your part, for which you may at best face a fine of several hundred thousand crowns. In the worst case, your activities may be considered by law enforcement authorities as a criminal offence of unauthorised gambling, for which you may face a prison sentence of several years in the worst case.