Sep 12, 2015; Dallas, TX, USA; A general view of the DraftKings sign board during the match with FC Dallas playing against New York City FC at Toyota Stadium. Mandatory Credit: Matthew Emmons-USA TODAY Sports
- DraftKings announced it has decided to scrap its tax surcharge on winning bets
- Decision came down to customer feedback
- The sports betting giant announced its decision a few hours after Flutter released its Q2 revenue reports
And just like that, the DraftKings plan to institute a tax surcharge on winning sports bets in four states is no more.
The sports betting giant announced its decision earlier tonight, citing customer feedback as the main reason for pulling back the plan.
“We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers,” the operator noted on social media and through an official company statement.
No More Tax Surcharge
DraftKings announced the tax surcharge on winning bets during its Q2 revenue reports on Aug. 1, citing the need to recoup losses in four states where sports betting taxes were higher than the national average.
The company announced plans to implement the surcharge in “high tax online sports betting states that have multiple operators (Illinois, New York, Pennsylvania, and Vermont) to ensure an operational effective tax rate of approximately 20%,” according to the company’s Q2 earnings report.
The plan was quickly met with consternation from customers and the industry alike.
“If you bet in IL, NY, PA, or VT get a load of this. DraftKings will be adding a SURCHARGE to be subtracted from YOUR net winnings to pay for THEIR TAX on gambling revenue. The money they make from losing bettors. Wow. Just wow,” Captain Jack Andrews (not his real name), professional sports bettor and co-founder of Unabated, posted on social media platform X.
Rush Street Interactive, parent company of BetRivers, was the first to publicly declare it would not be implementing a tax surcharge on winning sports bets.
“As we put our customers first, it was an easy decision for us,” Richard Schwartz, CEO of RSI, said in the release.
PENN Entertainment and Flutter came next, both companies noting they had no plans to institute a tax surcharge on winning bets in any states throughout the country during their recent Q2 revenue reports.
“We have no plans to institute a surcharge for winners,” Flutter CEO Peter Jackson said today during the company’s earning call.
PENN Entertainment CEO Jay Snowden also said the company had no plans to institute a tax surcharge, but did describe it as “interesting.”
So What Now?
While DraftKings is doing away with its tax surcharge plan, it’s likely that the company will institute other cost-saving measures. DraftKings may decide to cut promotional spending or offers to players in New York, Pennsylvania, Illinois, and Vermont as a way to counterbalance the high tax rates.
FanDuel will likely be doing the same, at least in Illinois, beginning 2025, Jackson said during today’s earning call.
“Our experience is that moderating levels of generosity and reducing local marketing is the best response,” he said during the earnings call.
Jackson described the graduated tax rate as “wrong” and said it unfairly punishes operators that have spent the most in a state to gain a customer base. Most states, he said, are able to find a happy medium to ensure growth and financial stability.
Both DraftKings and FanDuel will likely have to pay a 40% tax in Illinois moving forward, which taxes licensed sports betting operators at higher rates depending on their monthly sports betting performance. The 40% rate is the highest rate an operator has to pay in the state.
Rob covers all regulatory developments in online gambling. He specializes in US sports betting news along with casino regulation news as one of the most trusted sources in the country.
DraftKings, a popular daily fantasy sports and sports betting company, recently announced that they have decided to cancel their plans to implement a tax surcharge on their customers. The decision comes after facing backlash from both customers and lawmakers who were concerned about the potential impact of the surcharge.
The tax surcharge was initially proposed as a way for DraftKings to offset the costs of operating in certain states where they are required to pay additional taxes on their revenue. However, many customers were unhappy with the idea of having to pay extra fees on top of their already existing entry fees and bets.
In response to the criticism, DraftKings released a statement explaining their decision to cancel the surcharge. They stated that they had listened to feedback from their customers and recognized that the surcharge was not in line with their commitment to providing a positive and enjoyable experience for their users.
This move by DraftKings is seen as a win for consumers who were concerned about the potential financial burden of the tax surcharge. It also highlights the importance of listening to customer feedback and being responsive to their concerns.
Overall, DraftKings’ decision to cancel their plans for a tax surcharge demonstrates their commitment to putting their customers first and maintaining a positive relationship with them. It also serves as a reminder to other companies of the importance of considering the impact of new fees or charges on their customers before implementing them.
