	Introduction

Daily fantasy sports (DFS), a form of online gaming in which players assemble imaginary teams that amass points based on how well individual players perform in real-life sporting events, operates in a gray area of the law. Congressional action directly affecting the DFS industry dates back to a 2006 law, the Unlawful Internet Gambling Enforcement Act (UIGEA; P.L. It is also possible that courts could determine that DFS is subject to a 1992 law, the Professional and Amateur Sports Protection Act (PASPA; P.L. Roughly two dozen other companies also offer daily fantasy sports. According to Eilers Research, which studies the gaming industry, the DFS industry's net revenue (entry fees minus prizes) in the United States totaled $86 million in 2014. DFS and the Broader Gambling Industry

DFS is tiny relative to the gambling industry, whose casinos, Indian gaming operations, racinos, and state lotteries generated nearly $70 billion in net revenue in 2014. For example, in Indiana, some racinos, which are gambling venues located at racetracks, want to offer DFS sports contests at licensed racetrack casinos in hopes of stimulating interest in horse racing, even as other racino operators worry that DFS could negatively affect racino revenue. Some state-run lotteries are considering whether to offer online DFS games, while others are more concerned about losing customers to DFS. The Indian tribes that operate casinos generally have not weighed in on DFS, but some are concerned that it could affect gaming facilities that generated $28.5 billion in gross revenue in 2015. The legal status of fantasy sports under most state laws often turns on whether success in the activity depends primarily on the skill of individual contestants (which would likely make it legal) or mostly chance (which would probably make it unlawful gambling). Federal Laws Potentially Applicable to DFS

DFS may implicate at least four federal laws that are directly related to gambling: (1) the Unlawful Internet Gambling Enforcement Act; (2) the Professional and Amateur Sports Protection Act; (3) the Wire Act; and (4) the Illegal Gambling Business Act. The Massachusetts Gaming Commission released a "white paper" on daily fantasy sports in January 2016 that explored in detail the possible "constraint to state action" toward DFS that PASPA may pose:
The fact that PASPA prohibits a government entity "to sponsor, operate, advertise, promote, license or authorize by law or compact " suggests that conflict would only arise when a state passes legislation or joins a compact that involves one of the six PASPA verbs.… There is presently a dearth of case law discussing the limits of what would constitute affirmative state action sufficient to trigger a PASPA violation …
Any approach to state action outside of the six PASPA verbs should be a cautious one … While some states have promulgated legislation to specifically exempt DFS from their definitions of gambling/bet/wager, such action could be challenged as "authorizing" or "promoting" a sports betting scheme particularly where a state would be required to take affirmative action to achieve the goal. Some states are considering requiring DFS operators to obtain licenses and comply with certain consumer protection safeguards (such as employee background checks and ensuring that players are not underage or employed by a DFS company); others are interested in regulating the industry as they regulate gambling; still others are seeking to clarify its status under their existing gambling laws. Some DFS operators do not offer fantasy sports competitions in states where their legal status is unclear. These agreements might, for instance,
inadequately or imprecisely define what constitutes "customer funds" or "customer deposits"; fail to require that customer deposits be held at financial institutions that are insured by federal or state governments; fail to require that customer accounts be held and administered by independent third parties; expressly state that the agreement does not create a fiduciary or similar legal relationship between the customer and the DFS company; allow the DFS company to unilaterally amend the terms of agreement at any time and for any reason; allow the DFS company to deny prizes or "points" for amorphous reasons, such as if a customer has engaged in an activity that the company considers to be "adverse to [its] operation"; fail to establish what rights a customer might have to recover funds if the customer's account is canceled by the DFS operator for a violation of the terms of service agreement; and include liability waiver provisions. In response to these allegations, FanDuel and DraftKings prohibited their employees from playing DFS games on any DFS website. Federal Regulation

Congress could pass legislation specifically governing DFS games, such as laws to oversee state and tribal agencies that regulate DFS contests.
Daily fantasy sports (DFS) companies, which operate online gaming platforms that allow players to assemble imaginary sports teams and compete in daily or weekly contests, function in a gray area of the law. The federal government does not license or regulate them. State governments have the main responsibility for regulating gaming activities that offer the prospect of monetary rewards, but a series of federal laws, most recently the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA; P.L. 109-347), may limit states' ability to oversee DFS. The 2006 law, however, was enacted at a time when only season-long fantasy sports existed. Whether Congress intended it to exempt DFS from state regulation is unclear.
Congress, multiple states, and law enforcement agencies have questioned the legality of the fledgling DFS industry, with a central focus on whether DFS contests are indeed games of skill (which would most likely make DFS legal) or chance (which would probably make DFS unlawful gambling). The legal status of DFS under state law directly affects whether DFS operators may be federally prosecuted under the Illegal Gambling Business Act (P.L. 91-452) and whether banks and payment processors could be held liable for violating UIGEA if they process monetary transactions related to daily fantasy sports. It is also possible that courts could determine that the Professional and Amateur Sports Protection Act (PASPA; P.L. 102-559) prohibits most state legislatures from authorizing or regulating DFS.
In 2015, more than a dozen states considered whether or not to allow DFS operators to offer their gaming activities to individuals located within their borders. Nevada has decided to require DFS operators to obtain a license from its state gaming commission. Other states are considering a similar approach, which could include wagering taxes akin to the ones casinos pay. If state lawmakers decide to treat DFS as gambling, and if the courts determine that status is consistent with federal law, DFS would be subject to regulations, licensing, consumer protection safeguards, and other mandates where states choose to impose and enforce them. In the absence of state regulation, there is no means of assuring customers' access to funds on deposit with DFS operators and of enforcing prohibitions on participation by underage gamers.
Despite the controversy that surrounds it, the DFS sector is relatively small. FanDuel and DraftKings, the two largest operators, and the roughly two dozen smaller DFS companies are estimated to have booked around $86 million in net revenue (receipts minus prizes) from DFS in 2014, a small fraction of the regulated gambling industry's net revenue. Nonetheless, a variety of sports teams and organizations and media companies have invested in the DFS industry, suggesting a potential for rapid expansion if the industry's legal status is clarified.
There are strong differences of opinion within the traditional gambling industry on DFS. Some land-based casino operators fear losing customers to DFS games, while other casino owners see it as a potential new revenue source allowing them to attract younger players. Some Indian tribes that operate casinos have expressed concern about the prospect that DFS could reduce their revenues, but many tribes have not weighed in. In some states, racinos (gambling venues located at racetracks) may lobby to offer DFS sports to help increase interest in horse racing; in other states, racino operators worry that DFS will divert potential bettors from their facilities. A few state lotteries are considering whether to offer online DFS games.