DraftKings Highlights Risks of Increased Taxes for Illinois Bettors
DraftKings is voicing significant concerns about the potential impact of rising taxes on sports betting in Illinois, warning that these financial burdens could lead customers to unregulated platforms.
In a notable move, DraftKings has become the second major sportsbook to implement a transaction fee for all sports wagers in Illinois, a direct response to a newly enacted state surcharge on individual bets. Beginning September 1, bettors placing mobile and online wagers will incur a fee of $0.50.
This change follows FanDuel’s earlier decision to introduce a similar fee, both stemming from the Illinois state budget that recently imposed an additional tax on bets. Jason Robins, CEO of DraftKings, stated that the fee is a response to the increased financial strain imposed by the new regulations.
The recent tax hike raised DraftKings’ tax obligation to 40% of gross gaming revenue (GGR), significantly affecting operations. A previous strategy to mitigate this tax increase, which involved introducing a surcharge on player winnings in other high-tax states, was swiftly abandoned when no competing operators joined the initiative.
Robins expressed disappointment at the Illinois lawmakers’ decision to increase the tax threefold within just two years. He pointed out that such financial measures risk undermining the state’s regulated gambling environment, favoring illegal operators that do not contribute taxes or ensure consumer protections.
Impact of Increased Taxation on Legal Betting Landscape
The latest budget approved by Illinois lawmakers on May 31 stipulates that operators will be taxed $0.25 on wagers up to $20 million. Beyond this threshold, the tax increases to $0.50 per bet, placing significant pressure on large operators like DraftKings and FanDuel, who must now manage this additional fee alongside existing tax liabilities.
Estimates suggest that DraftKings could face a gross tax burden of $79 million under this new structure, prompting the company to consider passing these costs to its customers, similar to practices in the hotel and airline industries.
With these developments, DraftKings joins FanDuel in imposing the transaction fee as part of a broader response to the Illinois tax environment, where the two together command about 75% of the state’s market share.
Concerns Over the Illegal Market
Robins raised alarms that the increased tax rates may inadvertently bolster the illegal gambling market in Illinois. He urged stakeholders to reconsider the trajectory of such policies, positing that repealing the tax hike could lead DraftKings to eliminate its transaction fee.
“We’re deeply concerned about the repercussions for the regulated industry,” Robins stated. “Illinois continues to empower a growing illegal market, one that bypasses essential consumer protections.”
Shifts in Strategy for DraftKings
Interestingly, unlike last year when DraftKings proposed imposing additional fees first among other operators, they are now following FanDuel’s lead. Previously, when the idea of implementing a fee on player winnings sparked backlash from customers, they quickly retracted the plan after observing competitors’ hesitation.
As these developments unfold, it remains to be seen how DraftKings and the Illinois market will adapt to the changing regulatory landscape and what it may imply for the future of legal sports betting in the state.