It didn’t take long for Boston-based bookmaker DraftKings to announce a 50-cent per bet transaction fee in Illinois, following their archrival, FanDuel’s announcement to do the same after lawmakers imposed the per bet fee in its most recent budget.
Bookmakers Fighting Back
Few will shed any tears for U.S. bookmakers making bundles of money in the regulated market, but believing that routinely raising taxes won’t come with consequences reveals how little legislators know about the business of betting. This time, Illinois lawmakers may have stepped too far in hiking taxes on sportsbooks through a graduated per-transaction fee of 25 cents on volume below 20 million individual bets and 50 cents on wagers eclipsing that amount.
The transaction tax is the first of its kind in the nation, and is coming off Illinois’ raising sportsbooks’ tax last year from 15% to a tiered system based on adjusted gross revenues (AGR), which runs from 20% of annual AGR up to and including $30 million to as high as 40% of annual AGR over $200 million.
FanDuel and DraftKings, being the undisputed leaders in domestic sports betting, took umbrage at the tax that directly affects the biggest and most popular sportsbooks the most. However, FanDuel counterpunched by immediately announcing they would pass the cost off to consumers, which is something the legislators might not have anticipated, and charge their own 50-cent per transaction fee to their customers who also happen to be Illinoisans who vote.
DraftKings Announces Transaction Fee
DraftKings has tacitly asked FanDuel to follow their lead in New York when the company floated the idea of a winning wager surcharge in New York to combat the onerous 51% tax rate. However, FanDuel did not come along, and the idea was soon scrapped.
FanDuel Takes the Lead in Illinois
Yet, this time around, it was FanDuel not only proposing a fee to its customers but guaranteeing one would exist beginning September 1st when the NFL and college football seasons commence. There was no posturing or threatening; it was a matter-of-fact response to the transaction fee imposed by the legislators, whose thirst for additional funds seems to have no bounds.
DraftKings Joins the Customer Fee Movement
DraftKings didn’t harbor any grudges against FanDuel’s reluctance to follow them in New York and recently stated they, too, would be adding a 50-cent per bet charge to Illinois bettors as a cause-and-effect response to the additional tax.
“Illinois has been an important part of our growth, and we’re proud to have contributed meaningfully to the state through tax revenue, job creation, and a sustained investment in responsible gaming tools and resources,” DraftKings CEO Jason Robins said in a press release. “We are disappointed that Illinois policymakers have chosen to more than triple our tax rate over the past two years, and we are very concerned about what this will do to the legal, regulated industry. Meanwhile, Illinois continues to fuel the rapidly growing illegal industry, which pays no taxes or fees and provides none of the consumer protections that regulated operators offer.”
Both DraftKings and FanDuel have stated they would voluntarily rescind the transaction tax if the legislature does the same.
