FanDuel is not getting into the surcharge business.
Peter Jackson, CEO of parent company Flutter Entertainment, said during Tuesday’s second-quarter 2024 earnings call that placing an additional fee on winning bettors to offset high tax rates in certain markets is not the way to go.
“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.”
Flutter’s clear stance is a relief to bettors and likely U.S. state regulators. DraftKings floated the plan to add a surcharge on customers in New York, Pennsylvania, Illinois, and Vermont. Responses to the idea haven’t been positive publicly.
Not long after Flutter’s announcement, DraftKings backed off.
DraftKings Statement on Gaming Tax Surcharge pic.twitter.com/cucbsQJIVD
— DraftKings News (@DraftKingsNews) August 13, 2024
Tax concerns
Illinois began a new tax structure in July, charging operators a base of 20% with an escalating scale of up to 40% dependent on revenue thresholds being reached by sportsbooks.
This sparked DraftKings’ idea, but it didn’t catch on. Not only did FanDuel openly oppose it, BetRivers did the same last week.
“Most states have taken a sensible approach to date,” Jackson said.
However, he does think that there should be a “happy medium,” and states using a tax system that “punishes those who have invested the most” to grow business is “wrong.”
Jackson also believes there are negative consequences for those tax systems.
“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,” he said.
A different approach
Flutter is currently enjoying its U.S. business. Q2 2024 revenue rose 39% year-over-year to $1.53 billion, and FanDuel has claimed 51% of the sports betting net gaming revenue in the U.S.
Instead of using a surcharge to work around high tax rates, Flutter will focus on investing more in FanDuel’s products and find other ways to increase margins.
Flutter has dealt with this issue in international markets and will continue working with state regulators on these matters.
“We also find that smaller players may have to increase their prices which leads to us capturing more share, which provides an offset for us,” Jackson said.
