Skill gaming vs. Gambling: Differences & Regulations - Ikajo International


Skill gaming vs. Gambling: The core differences and regulations

Skill gaming vs. Gambling: The core differences and regulations
Business Development Specialist
Yuliia Mamonova
Table of Contents

    While the ages of Great Gatsby and fancy casinos are coming to an end, online gambling is rising to prominence. Luck, though, has nothing to with the spike. The ability to target global gamblers with a growing online presence does its thing. As illustrated by Statista, the online gambling market reached $45.8 billion in 2017 and is expected to grow up to $94.4 billion in 2024. 

    Skill gaming is also capturing public interest. However, some pitfalls cause lots of troubles when it comes to processing payments. The entire issue is rooted in endless confusion of skill gaming with gambling. The unclear regulation doesn’t make it any better. We are now to spread the light on the legal questions and core differences between skill gaming and gambling payment processing.

    What is skill gaming?

    Emerged in the early 2000s, skill gaming is a form of online game that bases on the player’s skills. Your cognitive and physical skills are your only friends. The final goal of any skill gaming type is winning a prize. It usually comes in the form of money.

    The most popular types of skill gaming:

    • Poker.
    • Backgammon.
    • Rummy.
    • Dominoes.
    • Chess.
    • Tonk.
    • Yahtzee.
    • Spades.

    What is gambling?

    Gambling is a kind of online game that relies on a chance. No mastership or experience can guarantee a positive outcome of the game. That what makes online gambling one of the riskiest niches on the market. Despite the crucial differences between skill gaming and gambling, the current legal regulations are unclear. As a result, skill gaming merchants face tremendous pressure when it comes to legal issues.Legal regulations

    Online gambling regulations

    Today, there are ten U.S. states where online gambling is permitted. Laws vary by state. Speaking about Europe, online gambling regulations also differ from country to country. European Commission is the party that acts as a connector between countries’ gambling regulatory bodies. 

    Skill gaming regulations

    While every U.S. state forbids unlicensed gambling, the rules for skill gaming remain unclear. What we know for sure is that to avoid being tagged as gambling, the outcome of a game must be defined by skill, not a chance. Even though courts struggle to determine how to weigh an element of skill in comparison to a chance. As a result, all the courts across the country maintain slightly different approaches to defining the niche. Florida, for example, prohibits skill gaming by statue, along with games of chance.

    Other states have some similarities in regulating skill gaming businesses. Once evaluating if the degree of skill involved in defining the outcome of a game is sufficient not to break the state’s gambling laws, state courts use a particular test. It is designed to establish whether the court deals with a skill game or illegal gambling. The analysis includes the three verification stages:

    1. Whether skill or chance is the dominant factor in the outcome (“Dominant Factor Test”);
    2. Whether a chance is a material element in the outcome (“Material Element Test”);
    3. Whether any chance at all is involved (“Any Chance Test”).

    The test is designed to define whether is it is a skill game or illegal gambling. An issue is that the line between a skill and a chance stays behind blurry. According to the Malta Skill Games Regulations, any merchant who offers such services requires a license issued under these regulations to provide a controlled skill game. The same is true for Australia. As stated by ICLG Gambling 2020 report, any games that are not entirely skill-based (there is an element of chance) fall within relevant gambling laws. 

    We now see that skill gaming, and gambling varies in both the game’s nature and regulations. Despite all the differences between the two, skill gaming owners still face problems. First and foremost, they struggle to open a merchant account. But why is it so?

    Skill gaming and gambling payment processing

    Skill gaming merchants have difficulties in getting a license from the government. However, their main struggle is getting an account in the acquiring bank and correct MCC

    Why the MCC (merchant category code) matter? Well, it does affect the skill gaming business from top to bottom. It affects what fees the company pays to a payment processor and what restrictions (if any) it has to meet. 

    Once again, skill gamers are often labeled by institutions as gamblers. Banks are not an exception. Skill gaming businesses often receive MCC7995, though it’s designed for gambling. MCC7995 regulates the following: casino, lottery, wagers. This MCC implies severe GEO regulations, lower conversion rates, and a wide range of other restrictions. 

    Skill gaming merchants were meant to achieve MCC7994. That MCC regulates video game establishments and arcades. As for today, skill gaming types include fantasy sports, trivia, and arcade games. Hence, they have a full right to achieve MCC7994. Unfortunately, the large part of acquiring banks don’t seem to see the difference. 

    How can skill gaming merchants get the right MCC?

    Despite all the regulations and limits, skill gaming merchants shouldn’t panic. PSPs (payment service providers) do know how to get them out of the trap. At Ikajo, we cooperate with 60+ acquiring banks worldwide. What that means, we have an opportunity to connect skill gaming merchants with the right banks. Moreover, if one acquirer refuses, the other two agree. Thanks to 15 years of experience, we know the difference between gambling and skill gaming merchant accounts. 


    It’s been less than twenty years as skill gaming tapped the market. As a result, its payment processing and legal regulations have not fully developed yet. Even though one’s desire to succeed in the skill gaming business does its thing. Exhale, choose the right payment provider and get ready to boost conversion.

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