A trend is emerging among state legislatures to legalize daily fantasy sports businesses. Just a year ago, daily fantasy sports (DFS) sites were coming under fire around the country. However, this year, several states have passed laws to legalize, regulate, and tax DFS sites, recognizing that these sites are popular and represent a method to raise state revenues.

Last year, the media was replete with news stories on the amount of money that Americans spend on DFS sites. Advertising by the major DFS players on televised football games was constant, and many calls came to outlaw DFS sites. The New York Attorney General took actions to shut these sites down to New York residents, and the Nevada Attorney General declared that DFS sites “constitute sports pools and gambling games” which require a gaming license. The DFS industry seemed to be under attack. Massachusetts began the trend of taxing DFS in November 2015, when the Massachusetts Attorney General published proposed regulations, and confirmed that winnings received by Massachusetts residents were subject to tax information reporting and withholding, and requiring disclosure to players of these tax requirements. These regulations created concerns in the DFS industry from an over-regulatory perspective, but also signaled an acceptance of the industry in general.

Within a span of four months, between March and August 2016, Indiana, Virginia, Tennessee, New York, Colorado, and Massachusetts passed laws legalizing DFS.

The New York law imposes a 15 percent tax on gross profit (entry fees less payouts) plus 0.5 percent on total revenue (with a cap of $50,000 on this 0.5 percent of total revenue).

The Tennessee law imposes a quarterly 6 percent privilege tax on adjusted revenues (entry fees less fess payouts).

The Massachusetts law calls for the creation of a commission to study taxation of the industry.

The Virginia law requires an initial $50,000 application fee.

The Connecticut and Pennsylvania legislatures, among others, considered DFS legalization bills, but none have been passed to date. Bills are likely to be reintroduced during the next legislative session.

Finally, the DFS industry received welcome news this month from the New Jersey Division of Taxation, when it ruled that DFS entry fees are not subject to sales tax.

This positive trend for the DFS industry is likely to continue after a shaky 2015.