FanDuel adds 50-cent surcharge on Illinois bets to offset state taxes, DraftKings may follow

CNBC

3 days ago

FanDuel is upping the ante in Illinois with a new 50-cent surcharge on all wagers, and DraftKings may be next.
Flutter-owned FanDuel is introducing the charge to mitigate the impact of new taxes that the state instituted with its new budget, which disproportionately affect the two leading sportsbooks.
The new tax is applied to each wager that a sportsbook accepts — 25 cents per bet for the first 20 million wagers, 50 cents per wager after that.
"Should the state reverse its decision at any point in the future, FanDuel will immediately remove the $0.50 transaction fee," Flutter said in a press release.
DraftKings may be following suit. In a statement issued on Tuesday, a company spokesperson said, "DraftKings anticipates taking action and expects to share more information soon."
Combined, FanDuel and DraftKings account for about 75% of the Illinois sports betting market.
Citizens gaming analyst Jordan Bender estimates the new transaction fee will translate to $79 million in new 2026 revenue for DraftKings, or 5.4% of its projected EBITDA for that year, and $86 million for FanDuel, about 2% of EBITDA.
The Illinois tax comes on top of a progressive tax passed last year, which leaves the most successful sportsbooks paying taxes at a rate of 40%. Before the change, they were paying at 15%.
When that tax bill passed, DraftKings initially said it would pass along the costs to consumers. After massive backlash, it reversed course.
Now FanDuel has picked up the gauntlet to manage the impact.
"It is important to recognize that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth and maximize revenue for states over time. We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering," said Flutter Entertainment CEO Peter Jackson in a statement.
There are a number of other state legislatures considering raising their own tax rates, including New Jersey, Maryland, Massachusetts, Michigan and Pennsylvania.
Jackson said the tax disproportionately punishes the companies that have invested the most in growing the regulated market, adding the fee will motivate gamblers to head to unregulated operators who don't pay taxes and don't have the same consumer protection.
And he said, the tax most affects recreational customers who make small bets.
"It is important to recognize that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth and maximize revenue for states over time," he said.