New Sports Betting Surcharge Announced Industry

DraftKings Announces Plans for Sports Betting Surcharge in High-Tax States

By Amelia Walker Senior Content Writer Updated: 12 August 2024

Amelia Walker Senior Content Writer

Amelia Walker is a Senior Content Writer at Betting.US. She has a law degree and deep knowledge of the gambling laws in the United States. Her mission is to keep players informed about responsible gambling, while her passion for sports helps her create useful guides. Amelia has over a decade of experience in betting, which has positioned her as a trusted voice among our readers.

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It has been revealed that the sports betting giant, DraftKings, is planning to bring in a surcharge on betting in states that impose high gambling taxes.

The move was announced recently by the sports betting operator, and it comes on the back of the recent sports betting tax hike in Illinois. Officials believe that the decision to introduce a surcharge by DraftKings has been taken in a bid to try and protect the operator’s bottom line.

According to reports, the company recently marked its first profitable quarter as a public company, which is an important milestone for DraftKings.

Data shows that revenues in the second quarter came in at $1.1 billion, which was in line with expectations from analysts. However, adjusted earnings did not meet expectations, with analysts predicting just over $133 million but actual earnings coming in at $128 million.

Following the decision to introduce a sports betting surcharge in some states, DraftKings has made adjustments to its 2024 revenue outlook. It has adjusted revenue forecasts to as high as $5.25 billion but has reduced its adjusted earnings forecast from $540 million to $420 million.

Surcharge to Start in 2025

It has been confirmed that the new surcharge on sports betting will begin on January 1st, 2025. The gaming tax surcharge will be applied to bettors’ net winnings, but this will only be in states where the tax rate is higher than 20 percent. In addition, the surcharge will only be introduced in high-tax states where there are multiple sports betting operators.

The states that will be affected by the new surcharge include Vermont, Illinois, New York, and Pennsylvania. The amount of the surcharge will vary between states, and the aim is to recoup some of the losses resulting from the higher taxes charged in the affected states. It is thought that the surcharge will be a certain percentage of bettors’ net winnings.

In a letter to shareholders, DraftKings wrote,

In Illinois, for example, it will amount to a low- to mid-single digit percentage of the Net Winnings a customer would previously have received.

The new surcharge was revealed amid growing success for the sports betting operator. User engagement is said to have improved, with the number of monthly unique players rising from an estimated 2.6 million to 3.1 million. This increase is thought to be partly down to a range of promotions that were designed to attract new players.

A Bid to Maintain Profitability

This latest move by DraftKings is a bid to try and maintain profitability at a time when some states have hiked tax rates and others are considering tax rate increases on gambling.

Some other sports betting companies have left the US market altogether over recent months, although it is thought that this could also be down to stiffer competition and the monopoly held by DraftKings and FanDuel in sports betting states.

The new surcharge is likely to upset a lot of sports fans in the affected states, as it means that they will lose a portion of their winnings.