Disclaimer: I am not an attorney and the following is not intended as legal advice. If you have questions regarding the following, consult with a lawyer licensed in your jurisdiction.
In 2006, the United States Government specifically ruled that fantasy sports is a game of skill, and a legal form of online gaming (UIGEA Full Text) so long as it meets the following conditions:
(A) All Prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.
(B) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.
(C) No winning outcome is based-
(1) On the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams, or
(2) Solely on any single performance of an individual athlete in any single real-world sporting or other event.
It is clear: DFS is legal federally under current US law written specifically for fantasy sports.
In some states DFS is against state law. (Click here for a comprehensive breakdown.) More often than not when you take a closer look, you will find this is not due to some sort of moral stance against fantasy football, but rather to protect one competing interest or another.
A great example of this is Montana, which has banned its residents from playing at FanDuel and DraftKings, but has state-run fantasy football with much worse payouts to the players. Montana's state-run fantasy football games have a contest fee of 26% (74% payout), while the industry standard is around 10%. Clearly Montana does not have an ethical problem with fantasy football.