In a highly anticipated earnings call, Peter Jackson, CEO of Flutter, the parent company of U.S. sports betting industry leader FanDuel, said his company would not follow DraftKings’ lead and impose a surcharge on winning tickets in high tax states.
Bad Idea
It’s no secret that online sportsbooks loathe the high taxes imposed by a handful of states like New York, whose 51% cut on revenues digs deep into profits. But Flutter Entertainment’s CEO, Peter Jackson, said subsidiary FanDuel would not be penalizing customers in high tax states on their winning wagers.
“We think that moderating levels of generosity or reducing local marketing is the best customer option,” Jackson said. “We have no plans to introduce a surcharge for winners.”
The discussion was ignited by DraftKings’ statement last month that said they would be instituting a 3.2% surcharge on winning bets on customers in New York, Pennsylvania, Illinois, and Vermont beginning in January 2025. The strategy aimed to mitigate the high tax burdens on mobile sportsbook revenues in those states.
Naturally, there was outrage in the betting community, but much to DraftKings’ chagrin, FanDuel did not take the bait and join them in a bid to strongarm the legislatures in those states to reduce taxes or their sports betting residents would suffer the consequences.
After news broke that Flutter would not be imposing the tax, DraftKings retracted its previous statement and has decided to reverse course, knowing it would be the only major player in the industry to levy a surcharge on winning tickets.
DraftKings Statement on Gaming Tax Surcharge pic.twitter.com/cucbsQJIVD
— DraftKings News (@DraftKingsNews) August 13, 2024
High Tax Blues
DraftKings’ ploy to unite all sportsbooks under its surcharge policy in high-tax states proved unsuccessful from the start. Both BetRivers and ESPN BET quickly made their thoughts known on the subject before FanDuel struck the final nail in its coffin.
Rush Street is the parent company of BetRivers, and when its CEO Richard Schwartz was asked whether his company would follow DraftKings’ lead, he said, “As we put our customers first, it was an easy decision for us.”
Penn Entertainment, the parent company of ESPN BET, echoed those sentiments through its CEO, Jay Snowden, whose mobile sports betting arm will be making its debut in New York on August 24th, with Snowden saying, “You should expect us to be observers. A tax surcharge in early 2025 isn’t even on our radar. However, I hesitate to say never.”
Although DraftKings’ gambit did not succeed, Jackson did take a tacit jab at those high-tax states by insinuating less attractive odds being foisted among its sports betting citizens could trigger a mass exodus to the offshore market.
“Most states have taken a sensible approach to date,” Jackson said. But then he added there must be a “happy medium,” and a high tax state “punishes those who have invested the most” is “wrong.”
“I think it will drive customers to offshore operators or potentially onshore operators who are offering unregulated, untaxed prop parlays under the guise of sweepstakes,” Jackson remarked.
