Gambling Industry Insights: Tax Shifts and Operator Impact
Investment Group Advocates Higher Taxes for Illinois Gamblers, Proposes Similar Measures for New York and Las Vegas Gambling Sector
Step aside, high-rollers! The gaming world is abuzz with recent changes in taxes that could shake up things for operators. Here's a rundown of what's happening in Illinois and New York, plus some insights on how it's affecting the market.
Illinois' Stealth Tax Hike
Barry Jonas of Truist Securities spotted a sneaky tax hike in Illinois, slated for their FY26 budget with a per-wager tax of $0.25 on the first 20 million bets placed annually, escalating to $0.50 for every bet beyond. If approved, effective July 1, this tax will disproportionately impact operators like DraftKings and Flutter, currently operating at a hefty 51% online sports betting (OSB) rate in Illinois[1][3][5].
Operators might employ various strategies to mitigate this increased tax burden, such as promotions, surcharges, or minimizing the bet minimums. Keep an eye on their actions as the tax becomes law and how it could impact their long-term igaming fortunes.
New York's OSB Hold Climb
Jeffries' David Katz noted a rise in statewide New York OSB hold by 320 basis points week-over-week to 13.1%, a trend since September[2]. Despite this marked increase, operators like Bally's, ESPN, and Resorts World witnessed a decrease. Meanwhile, industry leaders like Flutter, MGM, Caesars, DraftKings, and Fanatics maintained impressive hold rates.
Flutter remains the market leader with a 42% GGR market share, while DraftKings is gaining ground[2]. Keep monitoring these trends to see how these changes could reshape the New York market.
Las Vegas Strip Softness
According to Truist's Jonas, gaming on the Las Vegas Strip experienced a -3% year-over-year decline in April, grappling with tough hold competition and unfavorable accounting changes. However, baccarat saw a +41% year-over-year surge, with solid underlying slot and table volume metrics[1].
The locals' performance was marginally better, growing by 3% year-over-year, despite headwinds. Despite the dip in April, regional trends show a +3% year-over-year growth for the month[1]. Keep an eye on these trends and how they might play out in the coming months.
Insights
- The new tax structures in some states could potentially impact the profitability and competitiveness of operators, like the escalating per-wager tax in Illinois.
- High GGR taxes and the potential for them to be increased or extended, like in New York, can affect operators' profit margins and overall financial health.
- Consumers may face the brunt of these tax increases through higher prices or reduced promotions, potentially driving some bettors toward illegal markets[5].
- The tax structure can influence market dynamics, potentially favoring operators with larger customer bases or those willing to absorb higher costs to maintain market share.
Operators might face increased costs due to the escalating per-wager tax in Illinois, which could result in promotional changes, surcharges, or bet minimum adjustments to mitigate the tax burden.
The increasing Online Sports Betting hold in New York could reshape the market, with industry leaders like Flutter and DraftKings maintaining impressive hold rates and gaining market share.
