DraftKings has announced that it intends on adding a tax surcharge on every winning wager in select "high-tax" states starting in 2025.
The states that will be targeted include New York, Illinois, Pennsylvania and Vermont. In an "illustrative" post, DraftKings indicated that a 3.2% tax rate would be taken out of any winning wager in Illinois. It's unclear if that rate will be consistent in the other three states.
“The surcharge will be fairly nominal to the customer,” a DraftKings shareholder letter said. “In Illinois, for example, it will amount to a low- to mid-single digit percentage of the Net Winnings a customer would previously have received, but we believe additional upside potential exists for DraftKings’ adjusted EBITDA in 2025 and beyond from this gaming tax surcharge.”
This "fairly nominal" surcharge will exist on every winning wager, even if the bettor eventually ends up with a net loss from other wagers. Bettors are also forced to pay their own fair share in taxes on all winnings.
In effect, DraftKings is dumping a fee onto consumers — one that no other major sportsbook has implemented across the world.
The news comes after DraftKings' earnings from 2024 Q2 released on Thursday missed Wall Street expectations. The stock ($DKNG) is down 10.5% year-to-date.
It's the first-of-its-kind measure by an American sportsbook and could spell doom for bettors in these states if other sportsbooks decide to enact similar measures.
DraftKings has slowly lost market share to FanDuel, especially in new states.
New York (51%) and Pennsylvania (36%) had been the only states to take over 20% of total gross revenue in tax from operators. But Illinois implemented new provisions that increases their tax rate to 40%, and other states have bills in the works to potentially increase their tax rates, too.
DraftKings' shareholder letter indicated that they would implement this tax surcharge on any other state that intends on moving above that 20% threshold.
The company recently lost one portion of their business, as well: NFTs. DraftKings shut down its Reignmakers derivative earlier this week after a federal judge permitted a class action lawsuit to advance that alleges the company had been selling illegal securities.
