The daily fantasy sports (DFS) industry is immensely popular in the United States, with millions of registered users and an estimated annual revenue in excess of $300 million. See Dustin Gouker, New Official Data: Daily Fantasy Sports Generated $335 Million In Revenue In a Year, Legal Sports Report, https://www.legalsportsreport.com/21627/ny-dfs/ (last updated June 27, 2018). However, there have been several legal challenges to DFS at the federal and state levels, particularly concerning whether DFS contests should be considered a form of gambling. See, e.g., In re: Daily Fantasy Sports Litig., No. 1:16-md-02677 (D. Mass. filed Feb. 4, 2016). Some state attorneys general have opined that DFS contests are gambling, and some states such as Nevada have determined that DFS operators must be licensed under state gambling regulations. Many other states have expressly concluded that DFS is not considered gambling, however.

The issue of whether DFS contests constitute gambling arises in part because, unlike betting on the outcome of a sporting event, DFS contests involve a substantial degree of skill, although chance arguably does play at least some part. When evaluating a contest that involves both skill and chance to determine whether it constitutes gambling, most state courts will apply either the material element test or the predominate factor test to decide if the contest is considered gambling. Under the material element test, a contest is considered gambling if chance is a material element in the contest. Conversely, under the predominate factor test (also commonly referred to as the dominant factor test), a contest is not considered gambling if the dominant factor in the contest is skill.

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