By James Odato

ALBANY, N.Y. (Reuters) - Fantasy sports moved a step closer to being legal in New York on Saturday when lawmakers approved the daily and season-long games, clearing a path for FanDuel, DraftKings and others to offer them to millions of players in the state.

The multibillion-dollar industry, where players draft fantasy teams for sports including football, basketball and baseball, has drawn increased scrutiny since last year with the attorneys general of several U.S. states, including New York, Illinois and Nevada, questioning the legality of the games.

New York Attorney General Eric Schneiderman had held off on pursuing litigation against the fantasy companies for what he claimed were illegal gambling operations, and the companies have suspended their "games of skill" while the proposed legislation was in train.

New York's Senate passed the measure 45-17 early Saturday morning, sending the legislation that regulates and taxes the operators of fantasy sports games to Governor Andrew Cuomo.

It is unclear whether Cuomo will sign the legislation, which the Assembly passed on Friday.

Daily fantasy sports, a turbocharged version of the season-long game where players draft teams in live games played in just one evening or over a weekend, has boomed over the past decade.

State Assembly Gaming Committee Chairman J. Gary Pretlow predicted Cuomo would endorse the bill, partly because many young New York voters play the fantasy games and because it would generate tax revenues.

"It's a good thing for New Yorkers because there are more than three and half million participants, most of them millennials," Pretlow said.

DraftKings, which has dominated the industry along with FanDuel, praised the legislation as providing what it called a "sensible framework for regulating our games".

In a statement on Saturday, the company said it would resume operations soon with new rules that provide "fairness and transparency at the core" of all its contests, assuming the governor signs the legislation.

FanDuel pointed out that New York was the seventh state to pass a fantasy sports bill this year, following Colorado, Indiana, Mississippi, Missouri, Tennessee, and Virginia.

“It speaks to the popularity of our game” said Nigel Eccles, the company's CEO and co-founder.

The New York legislation calls for a 15 percent annual state tax on gross revenues of all sports fantasy contests with an entry fee. Another 0.5 percent will be assessed each year on the companies with a maximum of $50,000.

State Senator John Bonacic, who sponsored the bill, estimates annual state revenues will be about $5.5 million, adding that the measure is "going to make a lot of New Yorkers very happy".

The legislation survived heavy opposition from casino companies operating in New York.

Opponents said it would weaken New York's current gaming operations, including the horse racing industry which has been propped up by state government, by giving gamblers more options.

After intense lobbying from the fantasy gaming industry, which retained former pro quarterbacks Jim Kelly and Vinny Testaverde to promote the games, lawmakers beat a June 30 deadline to set regulations.

Schneiderman said in a statement on Saturday that he would enforce the law as amended, but his office would still pursue claims that DraftKings and FanDuel had engaged in false advertising and consumer fraud.

FanDuel and DraftKings are in early-stage talks to merge, people familiar with the matter told Reuters on Monday.

(Additional reporting by Frank McGurty; editing by David Clarke and Cynthia Osterman)