Virginia Governor Terry McAuliffe [official website] signed the Fantasy Contests Act [text] into law on Monday, making the state the first to regulate online fantasy sports. The law requires fantasy contest operators to register with the state and conduct annual independent audits. The operators must also submit annual reports to prove compliance with other provisions of the law, such as requiring all players to be at least 18 years old, keeping separate accounts of player funds and operational funds, ensuring that employees or their relatives do not participate in the contests, and other regulations. The statute sets a penalty of $1,000 for each violation and the possibility of civil action. Although some critics claim [AP report] the law will place a significant burden on smaller contest operators who will have a difficult time meeting the requirements, McAuliffe stated he believes it will protect consumers. The law will be effective July 1.

Many officials have stated that online fantasy sports may be an illegal form of gambling. Hawaii Attorney General Doug Chin [official website] released an advisory opinion in January declaring [JURIST report] that daily fantasy sports websites in which players pay to participate are considered gambling and are therefore illegal in the state. Also in January Texas Attorney General declared [JURIST report] daily fantasy sports websites illegal within the state. Earlier that month the Appellate Division of the New York State Supreme Court granted [JURIST report] FanDuel and Draftkings a stay allowing them to continue to operate within the state during their appeal. In August the US Court of Appeals for the Third Circuit [official website] ruled against New Jersey, deciding 2-1 to uphold [JURIST report] the federal ban on sports betting in all but four states. In December 2011 the US Department of Justice [official website] clarified its stance on online gambling [JURIST report] in a memorandum opinion holding online non-sports related gambling that crosses state or international borders is not covered by the Wire Act of 1961 [text, PDF].