Illinois lawmakers hiked the sports betting tax in two consecutive years, with the latest being a per-bet fee assessed to the sportsbooks. FanDuel has had enough and has announced it will be passing this fee along to the customer.
Every Action Has an Equal and Opposite Reaction
Sportsbooks have been taking it on the chin for several years in terms of tax increases, but for the first time, there has been a visceral response. Unlike DraftKings floating the idea of enacting a “gaming tax surcharge” in high-tax states, it appears FanDuel will follow through with their intention of charging a 50-cent per bet tax, which will offset the 50-cent per bet transaction fee that Illinois has recently announced.
Before last year’s legislative session, Illinois charged a reasonable 15% tax on adjusted gross revenues of each sportsbook operating in their state. However, during the session, they decided to hike it to a tiered structure that imposed the greatest tax on those sportsbooks that did the most volume. FanDuel and DraftKings, the two power players that control nearly 75% of the national market, were the most egregiously impacted by the new Illinois tax.
The tiered tax rate passed last year in Illinois is as follows:
- 20% of annual AGR up to and including $30 million;
- 25% of annual AGR over $30 million but not to exceed $50 million;
- 30% of annual AGR over $50 million but not to exceed $100 million;
- 35% of annual AGR over $100 million but not to exceed $200 million; and
- 40% of annual AGR over $200 million.
However, that wasn’t the end of it.
This session, Illinois legislators passed a per-bet tax on the sportsbooks that will assess a 25-cent tax on every bet under 20 million bets and 50 cents on every bet that is in excess of 20 million. This is why FanDuel has decided to charge the customer a 50-cent-per-bet tax beginning in September. “Should the state reverse its decision at any point in the future, FanDuel will immediately remove the $0.50 transaction fee,” Flutter, FanDuel’s parent company, said in a press release.
It is also thought that the legislators will feel the heat more intensely from their gambling constituents than any noise that an unsympathetic entity like a sportsbook could make. Now that the tax will be directly passed along to the customer, they will likely take issue with the bill, whereas before, only the sportsbooks would protest to no avail.
DraftKings May Follow Suit
It was only last year when DraftKings announced it was going to be implementing a “gaming tax surcharge” on winning wagers in high-tax states only. The Boston-based bookmaker was looking for an ally in FanDuel to do the same, effectuating an enhanced bottom line in states like New York, Vermont, and Illinois with high tax rates.
However, FanDuel did not heed the call, and DraftKings eventually dropped the idea, alarmed that they might lose market share to their nearest rivals and to other smaller players. But now the tables have turned, and DraftKings stated earlier this week through a company spokesperson, “DraftKings anticipates taking action and expects to share more information soon.”
That sounds like they, too, will be following FanDuel’s lead and charging a 50-cent per-bet transaction fee. This is a high-stakes game being played with Illinois lawmakers, and it will result in either both companies losing market share or having the state rescind its per-bet tax based on the ire of their constituents, who are ultimately those forced to pay the tax.
