The NFL season kicks off this week with all 32 teams in action, but the focus for many fans will be on the fantasy teams of players they've assembled in their minds and on the internet. State governments are now also trying to get in on the action, but they must run a tax policy reverse to score revenue.

According to the Fantasy Sports Trade Association, 21 percent of Americans will play fantasy sports in 2017, and no sport is as indebted to this trend as professional football.

Until recently, fantasy football was a season-long and typically low-stakes affair among friends and co-workers. But with the advent of daily fantasy sports (DFS) sites such as DraftKings and FanDuel, fans can now bet on players and collect winnings throughout the season. And they gamble a lot: Players spent an estimated $3.26 billion in 2016.

Wait, did I say "bet" and "gamble"? I’m sorry, I meant they "game" on players a lot.

The semantic difference matters. Sports gambling is legal only in Nevada and to a far lesser extent in Delaware. A 1992 federal law banned sports gambling in every state except the four that had previously established it (Montana and Oregon no longer offer sports gambling). New Jersey is currently fighting the federal ban on sports gambling in court, and several other states like California and New York may follow suit.

Yet 16 states have legalized DFS operators and eight tax them. For example, New Jersey recently legalized DFS games and will levy a 10.5 percent tax on the operators’ gross revenue (defined as players' entry fees minus prizes) from New Jersey residents.

But how is that possible given the federal gambling ban? The first few lines of New Jersey’s legislation explain:

(2)New Jersey courts define gambling as contests in which the elements of chance are considered to play a predominant role or affect a material impact upon the results of the contest;
(3)Participation in fantasy sports activities cannot be considered gambling under New Jersey laws because fantasy sports activities are contests in which the relative skill of the participants predominates to a degree that chance plays no material role in determining the outcome of the activities;

Still confused? Maybe an example will help. Odell Beckham Jr. is a talented but injured wide receiver for the New York Giants. If you think Beckham will play and help the Giants beat the Cowboys that’s illegal gambling because it’s reliant on chance. However, if you think Beckham will play and score your fantasy team points that’s largely a reflection of your skill and perfectly legal (and taxable in New Jersey).

The absurdity doesn’t stop there. The Garden State requires that fantasy sports operators in New Jersey must physically locate a server in … Atlantic City. And casinos offering the games—yes, casinos are already lining up to offer this totally not-gambling game of skill—must also keep their fantasy sports equipment in Atlantic City.

A state fiscal note estimated that New Jersey's DFS tax will raise only $6.6 million annually but with New Jersey and other states struggling to make budget math work they'll take what they can get.

Note this amount is also in the same ballpark as the approximately $15.4 million in tax revenue Nevada collected from sports gambling in fiscal year 2017, per the Nevada Gaming Control Board. Nevada has not passed any DFS legislation because DFS companies can operate in the state simply by registering with the Board and paying the same 6.75 percent tax on gambling that all casinos pay. Because DFS games are gambling.

If New Jersey and other states want to regulate and tax DFS games, which are often a worse bet than traditional sports gambling even with new regulation, they should continue their court challenges or get Congress to change the federal law. Either properly legalize and tax sports gambling of all types or drop the ridiculous notion that DFS is a game of skill in your state law.

Oh, but regardless of how this plays out, make sure to report all of your winnings from this gambling or gaming action on Line 21 of your federal form 1040. Because winning isn't everything; there are also deductions for losses. Enjoy the games.