DraftKings Shakes Up Betting World With Surcharge for High-Tax States
This article discusses how Draftkings, with its surcharge for states with high taxes, is upending the betting industry.
DraftKings threw a curveball at bettors on Thursday (August 1st) by announcing a surprise fee for folks in states with sky-high taxes.
In their Q2 update, the company said they are tackling high tax states by rolling out a gaming tax surcharge starting next year January 1st, 2025. This extra fee will hit winning bets in any state where taxes are over 20% AND there’s more than one sports betting company. It looks like New York, Illinois, Vermont, and Pennsylvania are on the hot seat for now.
Speaking of hot seats, New York’s tax rate is a whopping 51%, Pennsylvania’s at 36%, Vermont’s chillin’ at 20%, and Illinois just went all-in with a sliding scale that could reach 40% for big-time earners the low end starts at 20%.
DraftKings says the surcharge will be pretty small for customers. The only example they gave was for Illinois, where the fee will be a low to mid-single digit percentage taken out of your winnings. Bummer!
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In their presentation, they mentioned the surcharge will be a separate transaction when you cash out. Overall, this move should boost their adjusted thingy (EBITDA) next year.
Bettors and Pundits Not Happy!
Needless to say, DraftKings’ announcement caused a betting brawl online. Many folks like, X users and commentators slammed the decision.
One tweet said “If you are in IL, NY, PA, or VT, listen up. DraftKings is adding a SURCHARGE to STEAL from YOUR winnings to pay for their TAXES! They make money from losing bets too! Ridiculous!”
Analysts across the pond (UK’s Regulus Partners) blasted the surcharge, saying it would “lose customers, hurt their brand, and destroy trust in one fell swoop.” They basically said “DraftKings’ board needs to ditch this plan, apologize, and move on. Maybe someone should explain how this terrible idea got approved?!” Ouch!
One former casino exec (Richard Schuetz) offered a different view. He thinks CEO Jason Robins might be SO confident in DraftKings that bettors will stick around even with the fee. But Schuetz himself has a different idea…
“I think Robins hopes that if he raises prices, everyone else will follow.” Hmm, interesting theory…
So far, no other betting companies have announced similar plans. MGM didn’t mention it in their earnings call, and FanDuel hasn’t reported yet.
Will DraftKings back down? Will other companies follow suit? Stay tuned for the next episode of the Betting Game!
