Sports betting stocks slide after Illinois lawmakers approve tax hike
Online sports betting stocks retreated Monday after Illinois lawmakers approved a budget that again raised taxes on wagers, heightening investor alarm that other states could follow suit.
DraftKings dropped more than 5% and Flutter Entertainment shares fell more than 3%. The Roundhill Sports Betting & iGaming ETF (BETZ) eased more than 1%.
Both chambers of Illinois' state legislature passed a budget that includes a tax of 25 cents per wager on the first 20 million online sports bets made each fiscal year, rising to 50 cents per bet after.
Illinois Gov. J.B. Pritzker issued a statement saying he would sign the budget, according to local news reports.
Truist analyst Barry Jonas called the duties a last-minute surprise, adding that it's the second straight year of the state slapped an unexpected tax on the industry. Under the latest plan, Jonas said Illinois will be among the highest in the country.
Jonas said DraftKings and Flutter's FanDuel should both "certainly" surpass 20 million wagers, meaning they'll face the higher tax rate on a portion of their bets.
But Jonas called the impact for smaller competitors in the market more "modest." Still, shares of MGM Resorts, which owns the BetMGM platform through a 50/50 joint venture with Entain, declined almost 2%. Penn Entertainment, partners in the ESPN Bet platform, fell as much as 1.6%.
Now Wall Street is left wondering if other states will follow Illinois' lead and try and plug their budget deficits by either adopting or increasing online sports gambling taxes.
Statewide levies on digital sports bets at the start of 2024 ranged from 51% in New Hampshire, New York and Rhode Island to 6.75% in states like Nevada and Iowa, according to a report from the Tax Foundation. Only 27 states and D.C. allow online sports betting statewide, according to the nonprofit.
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