DraftKings announced that it will introduce the same $0.50 charge on every bet in Illinois as FanDuel in response to new taxes in the state.
The online sportsbook issued a statement last week with its CEO and co-founder, Jason Robins, commenting, “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.”
“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.”
Illinois tax increases
Illinois raised the tax on gaming revenue last year from 15% to 36% – 40%, depending on the size of the operators. For DraftKings, who hold around 70% of the market together with FanDuel, it pays the higher rate.
On top of this, Illinois made the controversial move of introducing a tax on every bet placed last week. From July, the state will charge operators $0.25 for all bets, and $0.50 for platforms that take in over 20 million bets. Due to the popularity of the platform, DraftKings will again be in the higher rate.
FanDuel was the first sportsbook to react to the tax increase, announcing on Tuesday last week that it will charge users 50c per bet from September 1. DraftKings has followed suit and will also introduce the tax on September 1.
Users will turn to illegal platforms
With a $0.50 charge, low-stakes bettors are left with the choice of turning to alternative licensed platforms yet to introduce a levy or to seek out unregulated operators.
In his statement, Robins believes users will turn to unregulated platforms such as offshore sportsbooks, which do not pay state taxes. He continued his statement, writing, “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.”
Last year, it is estimated licensed sportsbooks generated $1.2 billion in revenue, compared to $889 million generated by unlicensed platforms in the state, including offshore sportsbooks.
Sportsbooks hope pressure will cause a rethink
DraftKings stated that it will remove the levy if Illinois backtracks on the decision to introduce the charge. In the company press release, it stated, “DraftKings continues to support collaborative policymaking that works for the state and allows for the long-term sustainability of the industry. Should the legislation be repealed, the company will immediately remove the Illinois-specific per-wager transaction fee.”
The company introduced a charge on winning bets in Illinois following the tax hike last year, but it was the one to back down after users protested. At the time, it stated, “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 size of the tax increase this time, in addition to FanDuel also implementing the charge, means that DraftKings is less likely to reverse its decision. Analysts predict that the new tax would have cost sportsbooks an additional $70 million last year. If Illinois can get that additional money in the coming year, then it is unlikely the state will change its course, and in the end, bettors will pay the price.
Adam is an experienced writer with years of experience in the gambling industry. He has worked as a content writer and editor for five years on sites such as Oddschecker, CoinTelegraph and Gambling Industry News, bringing excellent knowledge of the world of sports betting and online gambling. Adam focuses on emerging stories in the ever changing landscape of betting in the US. Read the latest on prediction markets, changing legislation, and sweepstakes.
