DraftKings chief executive officer Jason Robins has once again criticized Illinois’ new sports betting tax, calling it “incredibly ill-conceived” and warning that it could hurt both the industry and consumers.
“It Just Makes No Sense”
In a candid interview with CNBC, Robins said the sudden implementation of the tax blindsided operators and will likely force major platforms like DraftKings and FanDuel to pass the cost onto bettors.
“It just makes no sense. It was done in the dead of night,” Robins said. “We had no warning. We actually met with legislative leaders in the weeks before the budget was released, and they made no mention of this.”
Under the new law, Illinois will charge sportsbooks 25 cents per online bet for the first 20 million wagers and 50 cents per bet beyond that.
That rate, Robins argues, makes it virtually impossible for companies to turn a profit without increasing fees for users.
DraftKings and FanDuel plan to introduce a 50-cent surcharge on every bet starting September 1, but say they’re willing to drop the fee if a compromise is reached.
An Issue Beyond Profitability
The concern, Robins noted, goes beyond profitability. He believes the move may drive users toward unregulated, offshore betting sites that don’t pay taxes and offer no consumer protections.
“All it’s going to do is drive people to the illegal market or drive people to bet more. It just makes no sense and it was done in the dead of night. We had no warning, actually met with legislative leaders in the weeks before the budget was released, and they made no mention of this, so it’s sort of crazy how it all went down.”, he added.
The CEO also explained that the new math will simply not work.
“Say somebody wants to make a bet of $1. The actual profit margin on that bet is probably about 10 cents,” Robins said.
“You’re getting charged 50 cents plus a tax on the 10 cents. Even at $10, the math doesn’t really work. You have to pass some of that along to the consumer. Otherwise, you can’t take that bet no matter what your size and scale is.”
While the tax applies to all operators, Robins believes DraftKings and FanDuel will feel it most acutely, though smaller companies also face similar financial pressure.
Illinois has passed 50 tax hikes since Governor J.B. Pritzker took office in 2019. Robins says many lawmakers may not fully understand that this latest tax isn’t based on profit, but on total betting volume, or gross receipts.
Though other states may not copy Illinois’ per-bet model, Robins warns rising tax rates elsewhere could also curb innovation and harm consumers in the long run.