While states are the final authority, they do not know how to regulate it. Obviously, daily fantasy sports are a lot less like gambling but more close to full-on sports betting, which is legal only in Las Vegas. But it is a lot more like gambling than traditional betting, particularly because of the luck factor.
So what steps should the state take? For a while, they did not do anything. But in October 2015, things changed. The U.S. Justice Department and the FBI started an investigation into FanDuel and DraftKings to determine whether daily fantasy sports are actually gambling, which would be a violation under federal law. The companies responded by lawyering-up, and hiring lobbyists. They also prepared for a battle towards legalization. Their future depended on the investigation.
The state of New York and Nevada took the side of the FBI and banned the sport, making it out as a form of illegal gambling. However, other states like Illinois stepped forward to legalize fantasy sports.
The tide eventually turned and a few months later, New York passed a law legalizing daily fantasy sports. While it is not legal in all the 50 states, it does seem that the companies are progressing.
Currently, there is not much government intervention overseeing fantasy sports in the way gambling regulators are overseeing sports betting in the state of Nevada.
However, the scandal involvingDraftKings and FanDuel is a wakeup call for the government, who are now planning to oversee the industry instead of banning it outright.