Published on: September 24, 2024, 05:45h.
Last updated on: September 24, 2024, 05:45h.
Less than two weeks after unveiling a plan to add surcharges to winning sports bets in certain high-tax states, DraftKings decided to scrap the idea. This move prevented a potential clash with New York regulators who were critical of the proposal.
The plan was focused on states with high sports wagering taxes, including New York, Illinois, Pennsylvania, and Vermont. Customers and regulators alike were displeased with the notion of DraftKings passing tax burdens onto bettors. New York State Gaming Commission Chair Brian O’Dwyer expressed strong disapproval of the proposal.
O’Dwyer criticized the proposal, calling it misleading and harmful to consumers. He reassured that the commission will carefully scrutinize any similar plans from licensees and reject them if necessary.
New York imposes a hefty 51% tax rate on online sports betting.
DraftKings Swiftly Scraps Surcharge Plan
The surcharge plan was introduced during the second-quarter earnings report on Aug. 1. Unlike competitors BetMGM and Caesars Sportsbook who did not mention similar tax plans in their financial results, DraftKings faced immediate backlash from customers and competitors.
Rival companies like Rush Street Interactive and FanDuel’s parent company, Flutter Entertainment, publicly denounced the surcharge idea. DraftKings abandoned the plan within an hour of FanDuel’s announcement, stating it valued customer feedback.
New York’s prominent position in the sports betting market allows it to maintain its competitive edge without altering tax structures to favor operators.
“New York remains an attractive venue for sports betting businesses, and there is no need to change our current regulatory or taxing framework,” O’Dwyer emphasized.
Operators Strategize to Navigate High Taxes
States like Illinois, New York, and Pennsylvania have high sports betting taxes, attracting gaming companies despite the financial challenges. Operators are exploring strategies to handle these taxes while ensuring profitability and growth.
FanDuel, for instance, plans to reduce promotional spending in Illinois following a new tax system on online sports betting. DraftKings CEO Jason Robins mentioned exploring solutions to address high taxes, emphasizing the need for a rational approach.