The federal gov't tho, has stated that the internet is a scary scary place and that US citizens don't really know what's good for them when they venture out onto it. They recognize in Congress that States are basically out of their league when dealing with gambling over the internet. It's not enough for a State to decide to do something or nothing about it's citizens gambling on the internet. They have, in the form of the UIGEA and an updated interpretation of the Wire Act (from the 1960's!!!), decided that they have the only say about what people should be spending their money on.
There would be no issue here if the federal gov't had not gotten involved, however it chose the fight, not the other way around. By allowing interstate internet wagering on Fantasy and Horse Racing, it has allowed internet wagering with or without the State's consent. This means that foreign companies (under the WTO agreements) are allowed to compete. If they are not allowed to compete, then it's protectionism. And if you review the debate on just Horse Racing in the US - that's exactly what it is. In fact the Dept. of Justice considers interent horse racing to be illegal, even though a carve-out exists specifically for it in the UIGEA.