DraftKings, FanDuel Caught Bluffing After Illinois Tax Increase

Public Act 103-0592 went live in Illinois on July 7, 2024 — included in the act is a brand-new tax on sports betting. Initially, sports betting operators scoffed at this tax hike, especially the big ones like DraftKings and FanDuel. However, it appears to be all talk now that the dust has settled.

In this article, we’ll be highlighting how major Illinois sports betting apps responded to the tax increase — both initially and now that it’s gone live. Spoiler alert: reactions are completely the opposite.

Operators Threatened Illinois In Wake Of Tax Hike

DraftKings and FanDuel executives can’t always speak 100 percent transparently. That’s because their words can have a tremendous impact on their stock price. This is a key reason why “corporate speak” is so common — even one slip-up can send stock prices surging or tanking. Either result can get unwanted attention from the SEC.

However, if you ever want to get a better read on what they’re really thinking, all you need to do is listen to a little-known organization called the Sports Betting Alliance — whose members include the likes of FanDuel, DraftKings, BetMGM, and Fanatics Sportsbook, for instance. In other words, the Alliance is essentially the mouthpiece for these operations.

Welp, upon the tax hike announcement, SBA President Jeremy Kuron said the following: “This tax hike doesn’t just threaten the legal, regulated sports betting market – it will have devastating effects for operators’ in-state partners, including the most vulnerable downstate casinos, who rely on sports betting revenue to create jobs and invest in communities.”

Ah, yes, the classic “this will destroy jobs” speak. These same operators hide behind that excuse when in reality, they just want to protect their own profits. Not that is wrong, because they stand to lose hundreds of millions of dollars cause of this (more on that soon).

Anyways, the President went on to add that operators would have “no choice but to” reconsider their Illinois operations. Yep, they threatened to close down shop in a legalized sports betting market that’s one of the richest in Illinois. But did they follow through? Predictable, no as we’ll cover in the next section.

Operators Stay Put As Bill Is Rolled Out

As mentioned, the bill officially went into effect earlier this month. Here’s how the legal sports betting landscape changed inside the state, starting with the new tax rates that are as follows:

  • 20% of annual AGSWR up to and including $30 million
  • 25% of annual AGSWR in excess of $30 million but not to exceed $50 million
  • 30% of annual AGSWR in excess of $50 million but not to exceed $100 million
  • 35% of annual AGSWR in excess of $100 million but not to exceed $200 million
  • 40% of annual AGSWR in excess of $200 million

As you can see, it’s now a tiered tax rate. Beforehand, it was a flat tax of 15 percent — which isn’t even a tier anymore. Every single operator inside Illinois will have to pony up more of its profits, but the biggest companies get hit the hardest. This is where DraftKings and FanDuel enter the equation. Using 2023 numbers, both qualify for the 40-percent tier.

Other operators to note include Caesars, ESPN BET, and BetMGM, which are gearing up for the 25 percent tax bracket if numbers hold up. Then there’s the 30 percent group, which is where BetRivers and Fanatics Sportsbook likely end up inside.

With these changes, the state of Illinois now has the fourth-highest sports betting tax in the nation. Analysts estimate operators will miss out on $200 million in profits due to the tax.

Not only that, but the publicly-owned companies also saw their stock price plummet on the heels of the announcement. DraftKings and FanDuel’s stocks both went down about double digits the day of, but have since recovered. Still, they have to grapple with the belief that other states will follow Illinois’s lead and increase their taxes.

But despite these losses and their threats, DraftKings and FanDuel haven’t budged once. As of this writing date, they are still live in Illinois and are running promotions geared at attracting first-time bettors. On the surface, it seems like business as usual — as it should since there’s world big money to be made despite the tax hike.

Offshore Betting Sites Remain Unaffected

We’ve neglected to mention how this affects the top offshore online sportsbooks: it doesn’t. Since they are located outside the United States, they don’t have to abide by local legislation nor pay taxes to those governments.

This is why we often recommend offshore sites to bettors in Illinois and elsewhere. These sites are generally more “free” than licensed ones. That means there are more betting markets available to bettors and the same goes for payment types (crypto only works on offshore platforms).

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Eric Uribe

Eric was born and raised in Nevada — the center of gambling in the United States. Throw in his natural interest in sports, and Eric was destined to be a sports bettor. This came to a head once Eric turned 21. Already a working sports journalist while in college, Eric began betting at his local sportsbook. Despite massive losses (at first), Eric continued to chip away at wagering. Eventually, he got half-decent at it. Now Eric is a trusted betting analyst. Not only is he skilled at making picks, but also breaking down the state of the industry — legalization, revenue, and innovation. You can read Eric's writings exclusively on OSB.