Betting News 
DraftKings is considering alternative solutions to manage high state taxes on sports betting, after withdrawing a controversial surcharge fee on winning bets. The decision came following negative customer feedback, as competitors like FanDuel opted against implementing a similar fee.
DraftKings Responds to Customer Concerns
During the Bank of America Gaming and Lodging Conference last Thursday, DraftKings CEO Jason Robins discussed the surcharge fee, which was announced and then swiftly retracted within 13 days. The plan was initially designed to offset high taxes in certain states, including Illinois, where tax rates for large sportsbooks have risen to 40%. However, the fee faced significant backlash from customers and was quickly abandoned.
Robins explained the company’s rationale behind the surcharge, stating that it was intended to allow for more investment in promos and other customer benefits. However, after considering the negative response from customers and industry observers, the company chose to abandon the idea.
“Clearly, this was something that our customers — they didn’t like this type of solution,” Robins said. “So we changed it.”
A Deliberate Approach to the Surcharge
Despite the public criticism, Robins defended the company’s approach, stating that the surcharge was never fully implemented, and the decision to reverse course was part of a deliberate strategy.
“We can always say we changed our mind,” Robins noted. “We decided to throw it out there and see what the reaction from customers was… and determined it wasn’t the right thing at this time.”
Alternative Solutions Under Consideration
While the surcharge is off the table for now, DraftKings continues to explore other options to manage the impact of high state taxes. Robins hinted that future solutions could emerge as sports betting operators adapt to the evolving tax landscape.
“There is something that maybe isn’t exactly this that I think could be a solution,” Robins said, although he declined to elaborate on specific plans.
The challenge posed by high taxes, particularly in states like Illinois, remains a concern. DraftKings expects to lose $50 million next year due to the Illinois tax increase, which has raised rates from 15% to 40% for larger sportsbooks. The Sports Betting Alliance, an industry lobbying group, has warned that these tax hikes could fuel the black market and degrade the quality of promos, odds, and other betting products.
FanDuel’s Alternative Response to High Taxes
Unlike DraftKings, FanDuel has chosen a different approach to dealing with the Illinois tax hike. Rather than implementing a surcharge, FanDuel has opted to reduce its marketing efforts and moderate its levels of promotions.
“We believe that moderating our levels of generosity or reducing local marketing efforts is a more effective response to higher tax rates,” said Peter Jackson, CEO of Flutter, FanDuel’s parent company.
The Road Ahead for DraftKings and Other Sportsbooks
As states like Illinois continue to increase taxes on sports betting, operators are left to find creative ways to mitigate the impact on their bottom lines. DraftKings and FanDuel have both confirmed that they do not plan to introduce state-specific odds or pricing despite the financial pressures.
With football season underway and DraftKings stock rebounding to $36.11 after hitting a low of $29.83, the company’s ability to navigate these challenges could play a significant role in its future market performance.
