FanDuel Makes Up Its Mind, Says No to DraftKings Surcharge Idea

Flutter Entertainment did not take long to mull things over. The company, which is based in Dublin, used the occasion of its earning call to openly state that it would not be implementing a “surcharge,” which was proposed by DraftKings two weeks ago as a way to ease the financial pain in states that collect stiff taxes on betting, such as New York, Pennsylvania, Vermont and Illinois.

Flutter Entertainment Says No to Surcharge, Sends DraftKings Stock Tumbling

This opposition has prompted DraftKings to issue a statement overnight in which the company said that it “listened to its customers,” and will be dropping its own ideas about a surcharge in a surprising heel turn.

“We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers.”

DraftKings statement on surcharge reversal

Yet, this may not have been the case had it not been for Flutter CEO Peter Jackson who stated flatly that he would not let his company introduce this tax.

“And so, we think that moderating the level of reducing local marketing is the best customer option and we have no plans to introduce a surcharge on winners,”  Jackson said. The statement was well received by investors who immediately sent the company’s stock up 10% whereas DraftKings took a tumble and went 4% down.

On year-to-date terms, FanDuel’s stock is up 6.92% whereas DraftKings is 10.81% down. Jackson has been mostly positive about the way states operate and run their tax regime when it comes to sports betting and casino gambling, but noted that Illinois’ recently implemented tax scheme felt a little too much.

The progressive tax introduced by Illinois puts companies such as DraftKings and FanDuel at a disadvantage as it expects them to pay a higher levy on their operations.

Not All Tax Regimes Are Good Tax Regimes, Says FanDuel

“I do think instituting a graduated tax system that punishes those who’ve invested the most to grow their businesses is wrong,” Jackson noted, criticizing the scheme and arguing that this would eventually lead to what the state is trying to avoid -drive players to offshore gambling operators.

The fact that FanDuel has refused to implement a surcharge could be an attempt to hurt the reputation of its opponent, but it may also come from a realization that the proposal would have harmful consequences on its own business, not to mention potential legal challenges.

Other companies have mostly kept quiet about what they would do, with ESPN Bet and BetMGM, along with Caesars, not commenting on whether they would introduce a surcharge, but not ruling out the possibility either.