DK headquarters imposes transaction fee on bets in Illinois
Illinois' New Wagering Tax Makes Betting More Expensive for DraftKings and FanDuel
Following FanDuel's lead, DraftKings has decided to impose a $0.50 transaction fee on every bet placed on its platform in Illinois, starting September 1. This move is a direct response to the Illinois State legislature's introduction of a wagering tax on all licensed operators from July 1.
The fresh tax demands $0.25 for each wager in the first 20 million combined Tier 1 and Tier 2 wagers annually. This tax is added to the state's already escalating wagering tax rate that took effect in July 2024.
DraftKings CEO Jason Robins expressed his displeasure about the increased tax, stating, "Illinois policymakers have chosen to more than triple our tax rate over the past two years, and we are very concerned about what this will do to the legal, regulated industry." He further added, "Meanwhile, Illinois continues to fuel the rapidly growing illegal industry, which pays no taxes or fees and provides none of the consumer protections that regulated operators offer."
The wagering tax is expected to generate around $36 million annually for the state, but analysts predict that it will reduce FanDuel and DraftKings' combined adjusted EBITDA by approximately $80 million in 2026, considering both companies are expected to surpass the 20 million wager threshold.
Shares in DraftKings Inc. (NASDAQ:DKNG) ended up 0.26 percent at $37.98 per share in New York Thursday. As competition in the sports betting market heats up, it remains to be seen if other states will follow Illinois' lead in imposing additional taxes on licensed operators.
- In response to the increased wagering tax in Illinois, DraftKings is considering diversifying its revenue streams, exploring potential investments in finance and technology to mitigate the financial impact on its business.
- The sports-betting market is increasingly seeing business strategies that intertwine technology and finance, as seen with DraftKings' potential shift towards venture capitalist investing in promising tech startups.
- Analysts predict that mounting tax pressures in the sports-betting market might encourage more operators to pivot towards investing in diverse sectors such as finance, technology, and even sports industries like esports or fantasy sports to ensure long-term sustainability.
