After FanDuel nixed the idea of joining DraftKings in imposing a surcharge on winning bets in high-tax states, the Boston-based bookmaker retreated from its position and has announced it will not be imposing the after-bet fee.
On Second Thought…
They say a good general knows when to retreat. And that is precisely what DraftKings is doing after Flutter announced that its subsidiary, FanDuel, would not be assessing a surcharge on winning bets on those customers located in states like New York (51%), Illinois (up to 40%), Pennsylvania (36%), and Vermont (31%) with high tax rates on mobile sportsbooks’ revenues.
DraftKings had announced last month that it would be imposing a 3.2% surcharge on winning bets in those four states beginning in 2025. The company’s CEO, Jason Robins, believed that customers would stay loyal because of its superior product.
“Obviously, some people might just react negatively to the idea of being charged at all,” DraftKings CEO Jason Robins said. “We feel it is an important step that consumers will ultimately understand if they feel the product and experience is better, then they’d rather pay for that than somewhere else that maybe doesn’t have as strong a product.”
Lack of Support
However, the moment FanDuel announced it would not join DraftKings in implementing a surcharge, the tide immediately turned and the decision was rescinded.
“We always listen to our customers and after hearing the 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,” DraftKings said in a statement.
The recent reversal is likely to assuage bettors’ concerns, particularly sports betting legend Billy Walters, who made no secret of his disdain for DK’s proposed tax on winning bets.
“Everybody’s kind of lost this deal,” Walters said. “The politicians supposedly did this for the citizens. They wanted to give them a legal, lawful place to bet where there was no criminal element and taxes and jobs could be created, yet people were going to be treated fairly.
“What’s happened is they’ve allowed a monopoly to get created, and when you’ve got a monopoly, the only person that wins is the person that’s got the monopoly.”
Message Delivered
Although every gaming company wants to build bigger margins, doing so at the expense of the betting public is a slippery slope that could make its market share evaporate. Despite DraftKings’ bluff being called, it does shed light on exorbitant tax rates that ultimately have a deleterious effect on sports betting customers in those states, whether they know it or not.
DraftKings took an overtly public approach to get the attention of the industry, but what many recreational bettors don’t realize is that sportsbooks in high-tax states employ far less obvious tactics to offset onerous taxes. Odds that are less attractive coupled with bonuses that are less generous and less frequent than in other states is a tactic that flies below the radar.
Should bettors in high-tax states believe they are not getting the best shake from their online sportsbooks due to less attractive odds or fewer bonuses to mitigate the sting of the high taxes, they could find other options.
And that is one of the primary concerns of U.S. sportsbooks and the states that benefit from their tax revenues. Customers fleeing the domestic market to get better deals at the offshore sportsbooks is a real concern and one that should be considered by high tax states like New York before the damage is done.
