The U.S. market-leading online sportsbook will begin charging customers in Illinois 50 cents to place a bet starting later this year, in response to the state’s new transaction fee for operators.
On the final day of May, the Illinois legislature voted to implement a new per-wager tax that is set to come into effect on July 1. It charges operators 25 cents per wager taken, up to the first 200 million bets per year. Above that volume threshold, operators would pay 50 cents per bet.
Experts and observers have noted that market leaders FanDuel and DraftKings will be in line to fork out the higher amount.
In response, FanDuel’s parent company Flutter issued a statement on Tuesday outlining its plans to mitigate what Flutter CEO Peter Jackson called a “punishing” measure by the state.
From Sept. 1, FanDuel will charge Illinoisans a 50-cent transaction fee on each bet placed, a decision it said reflects what is anticipated to be a significant increase in the cost of operating in the state.
Flutter stressed that the new state-imposed per-bet fee comes a year after Illinois began charging the highest-earning sportsbooks — again, meaning FanDuel and DraftKings — a 40% tax rate up from the previous flat rate of flat 15%. Flutter stressed that FanDuel made “extensive efforts” to absorb the cost of that much higher tax rate fully without impacting customers.
Illinois fee punishes ‘operators who have invested the most’
This time around, Flutter has decided it has no choice but to pass the higher cost onto consumers. It’s worth noting that FanDuel will operate for two months under the new Illinois scheme before it starts to charge users the surcharge.
“It is important to recognize that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth and maximize revenue for states over time,” said Jackson in a release. “We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers while also punishing those operators who have invested the most to grow the online regulated market in the state.”
Jackson also stressed the new state-imposed fee risks pushing players to the black market.
Flutter said that, should Illinois reverse its decision at any point in the future, FanDuel will immediately remove the 50-cent transaction fee.
DraftKings poised to take action
This isn’t the first time a major operator has announced plans for a customer surcharge.
Last summer, DraftKings unveiled and then quickly abandoned an intention to tax winning bettors in some jurisdictions last summer.
Jackson said at that time that Flutter had no plans to implement a surcharge. Now, it is doing just that, and on all bets rather than just winning wagers. However, the circumstances are very different, and Flutter’s move is a direct response to a single-state legislative measure.
In a statement provided to SBC Americas on Tuesday, a DraftKings spokesperson said that, “in response to the recent and prior mobile sports wagering tax increases in Illinois, DraftKings anticipates taking action and expects to share more information soon.”
Sports Betting Alliance president: ‘The anger is palpable’
FanDuel is the first major operator to announce such a mitigation measure since the Illinois transaction fee was revealed last weekend.
Derek Stevens, the CEO of the state’s smallest online sportsbook, Circa Sports, last week criticized the state’s move and opined that for smaller operators, “there’s no reason to take a bet less than 10 bucks.”
Meanwhile, the Sports Betting Alliance, which consists of FanDuel, DraftKings, BetMGM and Fanatics, called the transaction fee “a crippling tax.” The SBA mounted a last-minute campaign to rally Illinois bettors to push back, which ultimately appears to have failed despite more than 70,000 emails sent.
“The anger is palpable,” SBA President Jeremy Kudon said on the Low Rollers podcast. “[For] the industry in general, it’s one of those unifying moments … The sentiment is ‘wow, this is insane.’
“I nearly threw up, because I was like ‘this destroys the market.’ … As much as it pains us, we have no choice but to pass on [the added cost] … It is the only way to send a message to legislators that this matters.”
SBC Americas also reached out to BetMGM and Fanatics for this story.
