DraftKings is planning on “taking action” in response to Illinois’ shock proposed tax hike — but did not reveal how it would do so — after FanDuel announced a 50-cent transaction fee on its customers in the state.
The proposal to add a new per-wager tax — $0.25 for an operator’s first 20 million wagers, and $0.50 for wagers above that — in Illinois is set to hit the two market-leading operators hardest. InGame estimates that, when combined with the state’s existing progressive tax system, total state gaming taxes for FanDuel and DraftKings in Illinois could be even higher than New York’s 51% tax rate.
The proposal — announced to the industry’s surprise on a Saturday night — is still awaiting Gov. JB Pritzker’s signature to become law, but has already sparked plenty of questions about how the operators would mitigate or pass on the impact.
FanDuel revealed how it would respond Tuesday morning, announcing a 50-cent charge on every wager in the state. The charge will come into effect on Sept. 1, just before the start of the NFL season, even though the tax is set to come into force on July 1. The delay seemingly gives the state time to consider walking back the change.
DraftKings has yet to reveal its own plans, but it said that some sort of new policy is likely to be brought in.
“In response to the recent and prior mobile sports wagering tax increases in Illinois, DraftKings anticipates taking action and expects to share more information soon,” a spokesperson told InGame.
Winners’ surcharge 2.0?
The situation is reminiscent of the saga around DraftKings’ proposed “surcharge” for winning bettors last year.
That proposed change also came in response to a tax hike in Illinois. It would have taxed winning bets in any state where betting taxes were above 20%, with higher surcharges in states with the highest taxes.
But the notion was deeply unpopular with bettors. The final blow to the proposal may have been dealt by Peter Jackson, chief executive of FanDuel parent company Flutter. In an investor call, he said, “We have no plans to introduce a surcharge to winners,” and less than an hour later, DraftKings reversed its decision.
This time, it’s FanDuel that moved first with its attempt to pass the tax hike on to customers while its rival waits to react. DraftKings appears set to make some sort of change to mitigate the tax impact, but whether it will be as large as FanDuel’s charge remains to be seen.
The fact that the two operators did not present a united front and announce measures at the same time may suggest some degree of difference between their policies.
DraftKings shares rose Tuesday morning, in response to FanDuel’s move, by as much as 3.3% to $37.40, before settling at around $36.90, up 2%. Despite an initial 8.5% drop when the tax was revealed, the shares are now higher than they were before it came along.
