Louisiana is poised to increase its online sports betting tax rate, while Flutter Entertainment decides to pass new tax expenses to bettors in Illinois, underscoring the intensifying financial strain on U.S. sportsbooks in the face of mounting tax hikes.
On Sunday, the Louisiana Senate voted 35-3 in favor of House Bill 639, which raises the tax rate for online sports wagers from 15% to 21.5%. This legislation harmonizes online tax rates with those for traditional brick-and-mortar casino gaming and is now awaiting the signature of Governor Jeff Landry for final approval.
“This agreement was reached in collaboration with the industry,” stated Senator Stewart Cathey, who sponsored the bill. “There has been no opposition.”
Physical sportsbooks will maintain a tax rate of 10%. A preliminary proposal aimed at imposing a 32% tax rate for online sports betting was revised in the House before the bill’s passage.
Of the additional revenue generated by the hike, 25% will be allocated to the newly established SPORT Fund (Supporting Programs, Opportunities, Resources and Teams) aimed at benefiting Division I universities. These funds will provide support for scholarships, insurance, medical coverage, and facility enhancements.
However, these new funds cannot be utilized to compensate college athletes. A federal judge recently permitted U.S. colleges and universities to commence payments to athletes, adding to the existing use of names, images, and likenesses (NIL) effective from 2021.
“The legislation explicitly states that these funds cannot be used for NIL payments or direct athlete compensation,” Cathey remarked. “This is fundamentally against our stance.”
If enacted, Louisiana would be the third state this year to increase its online sports betting tax, joining Maryland and Illinois. Other states like New Jersey and Ohio are also contemplating modifications to their gaming tax frameworks.
In Illinois, Flutter, the parent company of FanDuel, announced it will impose a $0.50 transaction fee on all bets placed through its platform starting September 1. This decision follows Illinois’ new tax structure, which includes a $0.25 tax on the first 20 million bets annually, with a $0.50 fee beyond that limit. The state has also set a progressive revenue-based tax rate that peaks at 40% for operators with more than $200 million in adjusted gross revenue.
Flutter CEO Peter Jackson criticized this policy shift, asserting that it unfairly targets major operators and may divert bettors to unregulated platforms.
“We are disappointed that the new Illinois transaction fee will disproportionately affect lower-tier recreational bettors, while simultaneously punishing operators who have heavily invested in expanding the regulated online market within the state,” Jackson expressed.
He also noted, “This fee is likely to encourage some bettors in Illinois to turn to unregulated options. These operators evade tax contributions to the state, won’t enforce the recently instituted transaction fee, and do not offer the same level of customer protection.”
Flutter indicated that the transaction fee would be abolished if Illinois revises its decision.
Competitor DraftKings also mentioned that it is evaluating how to respond to the evolving tax structure. “In light of recent and past increases in mobile sports wagering taxes in Illinois, DraftKings intends to take appropriate steps and will provide additional information shortly,” the company stated in a communication to Bloomberg.
Last year, DraftKings backed away from implementing a proposed surcharge in high-tax jurisdictions after FanDuel opted not to pursue one.