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. The DFS industry has not been regulated by the federal government, but the attorneys general of several states have claimed that DFS either violates state laws or is subject to state regulation. Congressional action directly affecting the DFS industry dates back to a 2006 law, the Unlawful Internet Gambling Enforcement Act (UIGEA; P.L. 109-347 ), which outlaws illegal gambling using the Internet and bars banks, credit card firms, and other financial service providers from processing payments to companies offering "unlawful Internet gambling." UIGEA defines "unlawful Internet gambling" as placing or receiving a bet or wager via the Internet where such bet or wager is unlawful under either federal or state law. UIGEA provides an exemption to this prohibition for online participation in fantasy sports if the games have certain attributes including set prize pools, skill-based contests, and outcomes that do not depend solely on the performance of a single real-world team or player. However, DFS contests did not exist at the time of UIGEA's enactment in 2006, and there is debate about whether DFS, as presently offered to consumers, falls within the law's fantasy sports "exemption." 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. 102-559 ), which bans sports betting in most states, and to various other federal and state gambling laws. This uncertainty has drawn the attention of Congress, with some Members proposing to reexamine the legal status of the industry. Fantasy sports began as a type of informal gambling among friends, in which participants composed imaginary teams of active professional baseball players and won or lost depending on their players' statistical performance over the course of a full baseball season. Fantasy baseball developed into more formal "rotisserie leagues" in the 1980s, with elaborate rules and scoring systems. Daily fantasy sports essentially extends the fantasy concept to other sports, compresses season-long games into daily and weekly formats, and allows them to be played online among participants with no personal connection. DFS online gaming offers players a variety of sport options (e.g., baseball, basketball, football, and hockey), performance metrics, and types of contests ranging from one-on-one competitions to games with large numbers of participants. The idea is for a player to assemble an imaginary team that amasses points based on how well each individual on a team performs in real-life games, as measured by statistics such as the number of passing yards gained in football, the number of hits in baseball, or the percentage of three-point field goal attempts that are successful in basketball. To add to the challenge, every DFS player is given a salary cap, requiring that the sum of the real-life salaries of the players on each team fall below a specified level. Depending on the game the participant chooses to enter, the rewards for winning could range from a few dollars to a large amount in a guaranteed prize pool (GPP). DFS companies assert that these rewards are earned as the result of a fantasy sports player's skill rather than being the result of luck or chance. The companies' websites describe their offerings as "contests" and "games" and avoid such words as "gambling" and "bet." As discussed further below, the determination of whether players' rewards are earned as a result of skill or of chance may be significant in establishing the legal status of DFS. According to a study published in Sports Business Journal , "DFS affords a huge advantage to skilled players. In the first half of the 2015 MLB season, 91% of DFS player profits were won by just 1.3% of players." A separate survey of DFS participants conducted by Eilers Research in summer 2015 found that 70% of contestants lost money. These studies seem to suggest that the best players dominate everybody else because a certain amount of skill goes into putting together a winning daily fantasy lineup. One of the attractions of DFS is that it can be played on a variety of communication devices at a time and place of the participant's choosing. A typical fantasy sports player is younger, better educated, and wealthier than the usual visitor to a casino. A typical player is a male around 30 years of age who is extremely interested in sports and has played in fantasy leagues for several years. Many DFS participants formerly played online poker, which in the United States is now legal in only three states. According to the Fantasy Sports Trade Association (FSTA), the industry's national trade group, DFS players spent an average of $257 on entry fees and league-related materials in 2015. The two main DFS companies, FanDuel, founded in 2009, and DraftKings, launched in 2012, accounted for about 95% of the market's revenue in 2014, according to various estimates. Both companies are privately held. Roughly two dozen other companies also offer daily fantasy sports. The industry has a fairly simple revenue model. Players pay entry fees, which range from 25 cents to several thousand dollars, to compete in a single contest, whether against a small group of friends or against a huge pool of players seeking to win a prize pool in the millions of dollars. Operators in the industry typically keep a "rake" (the house's commission) of 5% to 15% of the total betting pool to cover operating costs and profit. DFS companies claim to distribute the rest as winnings. 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. The research firm said in late 2014 that "none of the major DFS providers are generating a profit, and it's unlikely that anyone will be cash flow positive in the next two years." Although DFS companies have not released detailed financial statements, it is generally believed that their aggressive advertising and marketing efforts are taking a large share of their net revenue. As shown in Figure 1 , FanDuel and DraftKings claim to have attracted 1.4 million paid active users in 2014, a huge uptick from fewer than 20,000 paid users as recently as 2011. FSTA, however, claims that the number of DFS players is small compared to the nearly 60 million people it estimates to have played season-long fantasy sports in 2015. The major DFS operators are backed financially by investors with other sports-related interests. Investors in FanDuel include Turner Sports (a subsidiary of Turner Broadcasting System), and cable television distributors Time Warner Cable and Comcast, while investors and marketing partnerships in DraftKings include the Kraft Group (which owns the New England Patriots football team), the Fox Sports cable television network, and Major League Baseball. In some cases, these investors may be less interested in the profitability of DFS than in its potential to enlarge the customer base for sports events and broadcasts. Sports leagues and associations have strongly opposed legalized sports betting, but some have supported the growth of fantasy sports partly because of the increased viewership that results from DFS contests. Cable television companies that carry sports programming, in some cases on high-cost tiers of service or on a pay-per-view basis, may see a similar benefit. According to DFS operator FanDuel, fans consume 40% more sports content once they start playing daily fantasy sports. Other companies have entered the market. Yahoo!, a recent entrant into the DFS market, offers daily and weekly fantasy sports games played for cash prizes on the Yahoo Sports daily fantasy website. CBS, the parent of the CBS television network, launched its own DFS product in August 2015. The ESPN cable sports network has arranged for DraftKings to promote its programs during its programming, and vice versa, instead of launching its own DFS platform. Television network executives may be especially interested in the prospect that DFS may keep players tuned in to a game with a lopsided score because they are more interested in individuals' performance than the final outcome. Such ventures have the potential to change the structure of the DFS market considerably. 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. Despite the DFS industry's modest size, its rapid growth has raised questions about its potential effect on the more established gambling industry. Casinos and casino hotels employed about 400,000 people nationwide in 2014, and they are a major source of government revenue. Lotteries and taxes on commercial casinos and other types of gambling generated $27.3 billion for state governments in 2014, according to the Rockefeller Institute of Government of the State University of New York. In Nevada, gaming taxes made up about 24% of the state's general fund revenue in FY2014, and Nevada counties collected additional fees and levies from casinos. Pennsylvania collects a tax of 55 cents on every dollar bet on slot machines in the state. DFS companies historically have not been regulated as gambling in most states; however, the question of whether they should be is currently being litigated in a number of jurisdictions, as discussed in the " Legal Status and Regulatory Environment " section of this report. The traditional gambling industry itself is split on how to respond to DFS. Some land-based casino operators fear losing customers to DFS operators, as DFS players can now participate in contests from any spot outside a casino using their computers and mobile devices, and worry that DFS, especially if left unregulated, could become as disruptive to gambling as other Internet-based companies, such as Airbnb and Uber, have been to the hotel and taxi industries, respectively.