A Fragmented but Growing Market
The rise of daily fantasy sports (DFS) and real-money skill-based games has created one of the most dynamic, yet regulatory-confused landscapes in modern gaming. While some U.S. states embrace fantasy sports as legal skill-based contests requiring minimal oversight, others treat them with the same scrutiny as gambling, demanding costly licenses—or banning them outright.
Globally, the framework is equally diverse. From Brazil’s hands-off approach to Ontario’s fully regulated system, fantasy sports are in a regulatory tug-of-war between gaming innovation and outdated gambling statutes.
This breakdown provides a full snapshot of where things stand in the U.S. and internationally, giving startups, investors, and gaming consultants the clearest guide to market entry strategy in 2025.
United States: A Patchwork of Permission and Prohibition
The U.S. does not regulate fantasy sports at the federal level, leaving oversight to individual states. This has created a three-tiered model:
Tier 1: Regulated States (Licensing Required)
These states require operators to apply for licenses and pay fees—some modest, some extremely high. The licensing process usually takes 1–2 months and includes background checks and revenue reporting.
Key states:
- Indiana – $50,000 initial fee; $5,000 annual renewal
- Delaware – $50,000 annual fee
- Louisiana – Tiered fees up to $40,000
- Michigan – $10,000 initial fee; $5,000 renewal
- Nevada – Requires a full sports betting license (~6–12 months, most expensive and strict)
Tier 2: Permissive but Unregulated States
Here, DFS is legal by omission—no specific laws exist, but contests operate freely.
Key states:
- Florida – DFS considered games of skill
- Georgia, Texas, California, Illinois – No licensing, no bans
- North Carolina, South Dakota, Oregon – DFS allowed without interference
Tier 3: Restricted or Prohibited States
These states either ban paid-entry fantasy outright or enforce prohibitive regulations.
Key states:
- Hawaii, Idaho, Montana, Utah – Paid DFS considered illegal
- Nevada – DFS classified as gambling, requiring sportsbook licensing
- Connecticut – Certain providers have exited the market following enforcement action
Many operators adopt a state-by-state geofencing approach, turning off access where licensing is unavailable or cost-prohibitive.
Licensing Costs: The Great Divide
Cost and complexity vary wildly:
- Low-cost states like Tennessee or Vermont offer fees as low as $300–$5,000.
- High-cost jurisdictions like Missouri, Delaware, or Indiana may demand up to $50,000–$75,000, and in Nevada, the sky’s the limit.
Some states, like Ohio and Louisiana, have tiered fee structures based on revenue, which can be more manageable for startups.
Tax and Approval Timelines
Approval timelines for licensing are generally 1 to 2 months, though Nevada and Australia (internationally) can take up to a year. Tax rates vary:
- Maryland – 15% on gross revenue
- New York – 15.5%
- Pennsylvania – $10K renewal every 5 years, plus background checks
Other states, like Massachusetts, allow operations without formal licensing as long as revenue taxes are paid.
International: Contrasting Approaches Around the World
Brazil
Fantasy sports are treated as games of skill and do not require licensing. Operators can enter freely but must comply with general business laws.
Canada
- Ontario – DFS is considered gambling and regulated under the AGCO. Licensing costs CAD $100,000 annually, plus 20% revenue share.
- Other provinces – DFS operates freely without licensing.
United Kingdom
DFS falls under pool betting and must be licensed by the UK Gambling Commission.
- Fees: £4,224 initial; £4,199 annual (for small operators)
- Timeline: ~4 months
- This is one of the most structured systems globally.
India
DFS is widely legal as a skill game, though no national licensing system exists. Nagaland and Sikkim offer optional state licenses, but most operators function without them.
Australia
DFS is allowed under wagering regulations. Operators must obtain licenses from state/territory bodies like the Northern Territory Racing Commission.
- Cost: AUD ~$28,200 initial and annual
- Timeline: 6–12 months
Free-to-Play Models as a Workaround
For operators avoiding U.S. licensing headaches, sweepstakes and free-to-enter contests remain viable alternatives. These formats often use dual-currency systems (e.g., gold coins and sweepstakes coins) to operate legally even in restrictive states.
Many platforms use this model to test markets, build an audience, and transition to real-money contests once licensing is achieved.
What This Means for New Entrants
For startups or investors, the message is clear: strategy must match jurisdiction. Jumping into DFS with a “launch everywhere” mindset can result in regulatory shutdowns, payment processor issues, or fines. A smart launch plan includes:
- Identifying Tier 1 states with clear licensing paths
- Utilizing free-to-play models for Tier 3 regions
- Monitoring global licensing opportunities, particularly in Brazil, India, and the UK
Conclusion
Fantasy sports and skill-based gaming continue to thrive, but regulation is no longer a gray area—it’s a defining factor in scalability. Understanding licensing obligations and adapting accordingly is critical for any operator looking to grow responsibly and profitably in 2025 and beyond.
