Analyst says sports betting tax hike in Illinois is catalyst for new surcharge

(The Center Square) – An industry insider says DraftKings announcement of a new surcharge on winnings in high-tax states is a reaction to Illinois’ tax hikes.

Illinois lawmakers approved a tax hike for sports books to as much as 40%, up from a flat 15%.

Illinois and three other states – New York, Pennsylvania and Vermont – were singled out in the announcement by DraftKings. The company is believed to be the first U.S. operator to implement a surcharge on the winnings of a bettor.

PlayIllinois.com managing editor Tyler Andrews said the timing of DraftKings decision is suspicious.

“Why is this happening right now,” said Andrews. “It seems like Illinois is the tipping point in this case, and I think this is probably on the backs of Illinois lawmakers for putting a sportsbook like DraftKings in this situation.”

Illinois is consistently one of the biggest sports betting markets in the country, usually finishing in the top-5 in sports betting handle.

In a letter to shareholders, DraftKings CEO Jason Robins said the new surcharge will be nominal for the customer. In Illinois, for example, it will amount to a low-to-mid single-digit percentage of new winnings.

The surcharge will go into effect in January 2025. The company’s stock tanked more than 10% Friday following the news.

Andrews said other sportsbooks in Illinois most likely will benefit from DraftKings decision.

“I think the effect that it is going to have is it will really anger bettors and probably cause them to go to another sportsbook if the odds are the same,” said Andrews.

Earlier this year, FanDuel reached out to its users asking them to protest the tax hike to Illinois lawmakers and the governor.

The alert, issued to customers through the FanDuel app, read:

“STOP THE SPORTS BETTING TAX HIKE! We NEED your HELP! The Illinois legislature wants to MASSIVELY increase the tax rate on your favorite form of entertainment – placing bets on the teams, players, and games that you love! Use the link below to tell Governor Pritzker and your state representatives to say NO to a sports betting tax hike.”

If you or someone you know has a gambling problem, call 1-800-GAMBLER or text ILGAMB to 833234.