Illinois Tax Hike Slumps DraftKings and Flutter Shares
Shares of the two leading sportsbooks in Illinois, DraftKings and FanDuel owner Flutter Entertainment, have plummeted after the state senate passed a budget that included a significant sports betting tax increase.
DraftKings' and Fanduel's shares closing value decreased by 10% and 8% respectively on Tuesday. (Source: Armad Ardity, Pixabay)
LISTEN TO THIS ARTICLE:Since June 2021, when sports betting was launched in the state, Illinois operators have been subject to a 15% tax rate. However, with the new progressive wagering tax system, operators with the highest adjusted gross revenue in the state will be taxed up to 40%.
Following the Senate's approval, the bill was ratified in the House and is now headed to Governor JB Pritzker's desk for signature. If enacted, the new tax rate will come into effect on July 1, putting Illinois on the list of states with the highest tax rates in the US, second only to New York's 51% rate.
Market Leaders Hit Hardest with New Tax
Since DraftKings and FanDuel hold the largest market share in Illinois, the tax hike would hit them the hardest. From the way their shares reacted to the news, it's clear that they are already bearing the brunt of the increased tax burden.
DraftKings ended Tuesday's trading session down 10% at $36.61, the company's worst single-day loss since November 2022 and its lowest closing price since January. In a similar vein, Flutter's shares closed at $188.33, a decrease of 8% from Monday's value.
According to JP Morgan, the proposed tax hike would boost DraftKings' and FanDuel's tax rates in the state to about 35%. This development would significantly cut their profit margins in the nation's third-largest sports betting market. The financial services company also projects that the new tax could cost DraftKings between $101 million to $134 million.
More Business News
Tax Increase Hits US Sports Betting
Increasing sports betting taxes seems to be the latest rising trend in the US sports betting landscape. Several states in the US are revisiting their tax structures and planning to implement new rates to maximize revenue from the fast-growing industry.
Last year, Ohio doubled its sports betting tax from 10% to 20%, six months after its sports betting market went live.
In April, Sen. John F. Mckeon introduced Senate Bill 3064 in New Jersey, proposing to double the state's iGaming and sports betting tax rate from 10% to 20%.
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