DraftKings Adopts Illinois Surcharge, Mirroring FanDuel's Steps
In the competitive world of online sports betting, DraftKings and FanDuel have announced they will be implementing a 50-cent transaction fee on every online wager in Illinois, effective September 1, 2022. This move comes in response to Illinois' recent sports betting tax hike, which has significantly impacted the earnings structure of these companies.
The tax hike in Illinois includes a progressive per-wager fee, with operators subjected to a levy of 25 cents per wager on the first 20 million bets they book. Once the 20 million threshold is exceeded, the levy doubles to 50 cents. This new tax scheme has led to DraftKings and FanDuel paying higher taxes than before, with FanDuel paying nearly $6.5 million more and DraftKings about $2.9 million more compared to previous flat rates.
The increased tax burden has prompted DraftKings and FanDuel to seek ways to offset these costs without absorbing them themselves. By passing the cost directly to customers, the companies hope to preserve their margins. However, this strategy may lead to "sticker shock" among casual gamblers, potentially discouraging some users or pushing them towards illegal or untaxed markets.
Both companies initially threatened to leave Illinois but ultimately chose to remain and impose the fees. FanDuel has even stated it would remove the transaction fee if lawmakers reconsider the tax hike, indicating a willingness to improve customer goodwill if regulation changes.
DraftKings is open to working with Illinois on constructive policy solutions regarding the per bet levy. The company, along with FanDuel, is part of a group of gaming companies that analysts predict could see their earnings trimmed by the new levy in Illinois.
This dynamic highlights how Illinois' tax policy directly influences both profitability and customer experience in major sports betting platforms. DraftKings continues to support collaborative policymaking that works for the state and allows for the long-term sustainability of the industry.
[1] CNBC. (2022). DraftKings to charge 50-cent fee on Illinois sports bets starting September 1. [online] Available at: https://www.cnbc.com/2022/08/01/draftkings-to-charge-50-cent-fee-on-illinois-sports-bets-starting-september-1.html
[2] Yahoo Finance. (2022). DraftKings to charge 50-cent fee on Illinois sports bets starting September 1. [online] Available at: https://finance.yahoo.com/news/draftkings-charge-50-cent-fee-illinois-sports-bets-starting-september-1-191548941.html
[3] SBC Americas. (2022). DraftKings and FanDuel to implement Illinois transaction fees in response to tax hike. [online] Available at: https://sbcamericas.com/news/draftkings-and-fanduel-to-implement-illinois-transaction-fees-in-response-to-tax-hike/
[4] Legal Sports Report. (2022). DraftKings, FanDuel implement Illinois sports betting transaction fees in response to tax hike. [online] Available at: https://www.legalsportsreport.com/28578/draftkings-fanduel-illinois-transaction-fees-tax-hike/
- The midwest's regional news outlets have reported that DraftKings and FanDuel, two popular sports betting platforms, will be implementing a 50-cent transaction fee on every sports bet placed in Illinois starting September 1, 2022, as a response to the state's recently increased sports betting tax.
- Financial analysts predict that this new transaction fee could significantly impact the earnings of DraftKings and FanDuel, as well as other gaming companies operating in Illinois, due to the progressive tax structure enacted by the state.
- In response to the increased financial burden from the tax hike, DraftKings and FanDuel have decided to pass along the cost to their customers, a strategy that could potentially discourage casual gamblers due to "sticker shock" and potentially drive them towards unregulated, untaxed markets.
