New Surcharge in Four States to Affect DraftKings Winning Players
Four US states announced their plans to increase sports wagering taxes. FanDuel and DraftKings expressed concerns about the impending new tax rates. The latter will implement a new surcharge for DraftKings winning players.
Even said, DraftKings considered adding a premium to clients’ net wins because of the high tax rates in a few jurisdictions. According to the best pay per head bookie, shareholders were informed of the proposal in a letter issued on Thursday. It is anticipated that DraftKings will post its second-quarter results on Friday, August 2, 2024, before this announcement.
In a recent letter, DraftKings’ CEO and co-founder, Jason D. Robins, highlighted the implementation of a specific fee as a viable solution to address the challenge of high tax rates in numerous jurisdictions.
New Surcharge Affects DraftKings Winning Players
According to Robins, the gaming industry has not given this strategy much thought in countries with low tax rates—the only country where it has is Germany, where taxes are rather high. Robins mentioned that DraftKings is considering adding a gaming tax levy to consumer gains in jurisdictions with a tax rate higher than 20%. For this fee to be implemented, there must be more than one sports betting provider in the state.
The sports betting tax rate in New York is now the highest in the nation. The state imposes a 51% tax on licensed sportsbooks. However, Illinois passed a new tax betting law earlier this year, and Pennsylvania has a similarly high tax rate of 36%. Under that statute, sportsbooks in Illinois that fulfill specific requirements would be subject to a maximum tax rate of 40%.
According to bookie PPH experts, Vermont is one of the few states with a betting tax above 30%. The state also imposes a 33% tax on licensed sportsbooks.
Players Concerned about New Surcharge
The proposed levy on DraftKings’ consumers’ net wins is expected to impact the states indicated above. Still, according to Robins, DraftKings will “absorb taxes up to 20%,” meaning that customers would only feel the effects if the tax rate rises over this threshold. The executive gave the example of Illinois, where the cost would be a small to medium proportion of the customer’s net winnings.
According to Robins, the company’s optimistic outlook for 2025 Adjusted EBITDA—estimated to be between $900 million and $1 billion—will be driven by the solid start for the year and further expansion in new client acquisition. “Additional upside potential exists” when considering the proposed tax increase, he said. The anticipated implementation date of the fee is January 1, 2025.
Online sports bettors and fans have voiced their disapproval of DraftKings’ decision to use winnings from clients to pay for gambling taxes. According to gambling industry reports, the intentions for the fee have not diminished DraftKings’ position as a leader in several states. Whether other companies in the industry or the company’s primary competitor, FanDuel, think about doing the same is anyone’s guess.
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