DraftKings Inc. is throwing in the towel on its plan to hit winning bettors with an extra fee if they live in a state with a higher tax rate — but only after its chief rival FanDuel made it clear it would not follow suit.
"We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge," DraftKings said in a statement Tuesday evening. "We are always committed to delivering the best value in the industry to our loyal customers."
The Boston-based bookmaker announced the decision shortly after the chief executive of FanDuel-parent Flutter Entertainment PLC said they had no plans to institute a gaming tax surcharge of their own.
DraftKings earlier this month revealed its plan for a small surcharge on winning bets that it would impose on winning players in the higher-tax jurisdictions of New York, Pennsylvania, Vermont, and Illinois.
DraftKings Statement on Gaming Tax Surcharge pic.twitter.com/cucbsQJIVD
— DraftKings News (@DraftKingsNews) August 13, 2024
The decision followed a tax hike in Illinois earlier this year that boosted the amount DraftKings and others must pay to as high as 40% of their revenue.
An investor presentation from DraftKings suggested the proposed "gaming tax surcharge" could be worth a small percentage of a bettors' winnings, such as 3.2% in Illinois. The company also suggested the measure could help with profitability, noting there could be "upside" to its adjusted earnings starting next year, when it planned to begin imposing the fee.
And now it's all over
DraftKings CEO Jason Robins even floated the idea that the surcharge could persuade other states not to hike their tax rates if it meant hearing from angry bettors. Whether it would fly with regulators was unknown, as several said they were reviewing the idea after it was announced.
All that’s over now, though, as DraftKings says it is scrapping the plan. It is doing so after Flutter, ESPN BET-operator PENN Entertainment, and BetRivers-operator Rush Street Interactive all indicated they would not join in, leaving DraftKings isolated and possibly facing blowback from customers and regulators.
