FanDuel Responds to Illinois Tax Changes with a Surcharge

Sports betting giant FanDuel has responded to Illinois’ recent sports betting tax changes by introducing a surcharge on all wagers.

FanDuel Introduces Surcharge to Consumers’ Dismay

As more and more US markets are considering higher taxes for sportsbooks, operators are eyeing various measures to mitigate the damage. Since margins sit at the core of gambling companies’ businesses, tax hikes often necessitate certain changes.

In Illinois, which recently introduced a new tax regime, FanDuel just confirmed a new charge on sports bets. As a result, every time players place a bet, they will have to pay an additional 50 cents.

Industry proponents argue that this measure is needed since FanDuel and DraftKings, the two biggest sports betting operators in the Prairie State, would be disproportionately affected. For context, the new tax rules put a 25-cent charge on each of the first 20 million bets a sports betting operator accepts. Following these first few million wagers, the charge would increase to 50 cents per bet instead.

Since FanDuel and DraftKings are the only sportsbooks that reach such volumes, they will be more affected than their competitors.

Illinois’ New Tax Could Hurt the Market

Experts predict that FanDuel and DraftKings would lose tens of millions of dollars due to the new tax framework. According to estimates by Jordan Bender from Citizens Gaming, FanDuel and DraftKings could lose $89 million and $79 million, respectively.

While the surcharge would mitigate some of the damage, industry experts predict that it would still have a negative effect on the broader market. Last year, DraftKings considered a similar surcharge, prompting intense backlash from consumers. As a result, introducing a surcharge now could potentially alienate many players, incurring additional losses.

To make matters worse, Flutter Entertainment, FanDuel’s parent company, argued that the surcharge could potentially drive people away from the regulated market, pushing them into the much more dangerous unregulated sector.

More States Consider Higher Taxes

Illinois isn’t the only state that has changed the way in which gambling operators are taxed. For example, the Louisiana Senate just passed a bill that would increase the state’s online sports betting tax. The measure is currently heading to the governor’s desk for a final approval.

In the meantime, Maryland just increased its tax on online bets by 5%, while Colorado ended promo deductions for sportsbooks.