Less than two weeks after announcing a plan to tax winning bettors in some jurisdictions, DraftKings is changing course.
Announcement comes shortly after Flutter’s earnings call
The company announced Tuesday that the planned implementation of a roughly 3-5% surcharge on winning bets in New York, Pennsylvania, Vermont and Illinois on Jan. 1, 2025 will no longer be moving forward. The company released the following statement on social media:
“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.”
The announcement came shortly after the conclusion of the Flutter Q2 earnings call, during which CEO Peter Jackson said the company had no plans to implement a surcharge.
A number of operators came out against sports betting surcharge
The sentiment echoed that of Penn Entertainment and followed an announcement by Rush Street Gaming that they would never implement a surcharge for customers.
When DraftKings first presented the idea during its Q2 earnings call, CEO Jason Robins seemed confident that others would follow suit.
“I think every company has to do what’s best for their own business. I think we believe this is what’s best for us. And I would imagine that, you know, if that’s our calculus, then others would come to the same conclusion,” he said earlier this month.
The four states selected for the surcharge all have tax rates greater than 20% on GGR and have more than one sports betting operator in the state. DraftKings and Robins have long been critical of New York’s 51% tax rate, while many in the industry have lamented what they deem a short-sighted decision by Illinois to increase and tier its sports betting tax structure.
However, while Flutter and Penn were not quite as adamant in their dismissal of the surcharge as Rush Street, the general consensus among other major operators was that a surcharge was not something they were considering in the short term. All mentioned addressing the new tax burdens with revised marketing spend.
Many criticized move by DraftKings
The public blowback against DraftKings after the announcement was pronounced, with many notable bettors and industry experts taking to social media to question the decision. Moreover, some financial analysts were quick to question the viability of the proposal.
Regulus Partners was particularly critical of the move.
“To suggest this is brave is a euphemism, in our view, and the brand is already likely to be suffering damage. There is only one sensible thing for the DraftKings board to do now – publicly dump the policy, say sorry, and move on, while privately inquiring how on earth such a self-defeating policy could be publicly announced,” the group wrote after the announcement.
After substantial criticism and blowback, it appears the company has done just that.
