DraftKings No Longer Moving Forward With Gaming Tax Surcharge

DraftKings will no longer be going forward with its plans to tax winning bets. Fans criticized the controversial decision by DraftKings, but it appeared DK would still move forward with its choice. However, just hours after FanDuel stated they would not follow suit, DraftKings announced the company would no longer implement the surcharge.

“We always listen to our customers, and after hearing their feedback, we have decided not to move forward with the gaming tax surcharge,” DraftKings announced in a statement. “We are always committed to delivering the best value in the industry to our loyal customers.”

DraftKings Was On An Island With Surcharge Plan

DraftKings made the initial announcement regarding the surcharge during a recent earnings report. It did not take long for other sports betting operators to respond.

RSI, the parent company of BetRivers, issued a press release stating that RSI has no surcharge plans. “As we put our customers first, it was an easy decision for us.”

Circa Sports Director of Operations Jeffery Benson responded to a tweet asking if the company would add a surcharge. His response was, “Not at this time.”

Penn Entertainment CEO Jay Snowden addressed a potential surcharge during a recent earnings call. No surcharge is in the current plans for ESPN Bet.

“You should expect us to be observers. A tax surcharge in early 2025 isn’t even on our radar. However, I hesitate to say never,” said Snowden.

During Flutter Entertainment’s Q2 Earnings call, CEO Peter Jackson said that FanDuel has no plans to add a surcharge tax on betting wins. “Our experience is that moderating levels of generosity and reducing local marketing is the best response,” said Jackson.

DraftKings, likely feeling the heat and seeing no other sportsbook operator joining the trend, retracted its decision.

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What Will Be DraftKings Next Move?

The question now is, how will DraftKings manage increased sports betting taxes? The reason behind the choice of surcharges was that states raised sportsbook tax rates. New York, Illinois, Pennsylvania, and Vermont all have tax rates over 20% and would have been the only markets to see the surcharge. The DraftKings surcharge tax decision came after lost revenue in these markets. DraftKings will likely return to the drawing board and strategize a new approach.

During Flutter’s earnings report, the company focused on the Illinois tax rate. Due to the graduated tax rate in Illinois, Flutter estimates a $50 million revenue impact. The company plans to “mitigate 50% of the cost in 2025 through locally optimized promotional and market spend.” This means that there will be fewer promotions in Illinois beginning in 2025. DraftKings may follow this route to offset their own losses.

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