DraftKings and FanDuel Brace for High-Tax Boom in Illinois Betting Scene

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The US online sports betting industry has been met with a curved ball as DraftKings and FanDuel, denizens of the sector, found themselves at the receiving end of a new progressive sports wagering tax in Illinois. The repercussions were echoed by a subtle dip in the shares of DraftKings upon the news, and a heightened cautionary attitude among investors, fearful of the domino effects this new legislation could inspire in other states.

Under the new curtain of regulation brewing in the Prairie State, DraftKings and FanDuel parent Flutter Entertainment may see their Illinois tax rates leap from a steady 15% to a towering 36% and 37%, respectively. This massive jump in taxation was a foreseeable turn of events, as Illinois grapples with punch holes in its budget. Regardless, the idea of other states conforming to this high-tax blueprint has sent chills down the market’s spine.

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Stifel analyst, Jeffrey Stantial, however, offers a beacon of optimism in the looming gloom. He posits that while there’s an undeniable heightening of regulatory headwinds, the initial backpedaling overblows the risk of a contagion effect. In fact, raising the tax bar could be read as a favorable pointer towards a potential revival of iCasino expansion ambitions.

Stantial embraced a positive outlook on the DraftKings’ forthcoming trajectory, with a $50 price target that translates to a potential upside of about 39% from the stock’s current perch.

In the landscape of the new tax policy, Illinois is not specifically pointing the cannon at DraftKings and FanDuel. Yet, the design of the sports wagering tax places more burden on larger operators, inadvertently putting these sports betting czars under the microscope. By some estimates, these titans account for roughly 70-75% of the entire US online sports wagering market share.

This new tax diorama expected to be launched come July 1 will require top-earning sportsbook operators, armed with meaty revenues, to shell out larger slices of their adjusted gaming revenue (AGR) to the state. Ironically, the smaller competitors could find themselves sporting lighter tax burdens.

Stantial broke down the upcoming schedule of taxations, explaining that operators’ liabilities would vary between 20% to 40% based on their respective AGRs.

By Stantial’s projections, this incoming legislation could cause a ripple effect of promotional shrinkage as operators scramble to align with the increased taxation. This fresh wave of disruption could even lead to reduced marketing spending in Illinois as an added measure for the companies wrestling with the escalated tax bills.

However, amid the outcry from gaming trade groups contending that customers could be saddled with longer odds in the quest to manage the higher taxes, Stantial affirms that there is scant evidence to back these claims.

Drawing on concrete examples from Europe and specific American states, he expostulated that tax hikes haven’t generally translated to worsening odds for bettors. In conclusion, his comforting assurance revolved around the foresight of DraftKings and FanDuel facing manageable impacts from the new tax regime, leaving only the mildest of dents for the other gaming operators in Illinois.

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Melinda Cochrane is a poet, teacher and fiction author. She is also the editor and publisher of The Inspired Heart, a collection of international writers. Melinda also runs a publishing company, Melinda Cochrane International books for aspiring writers, based out Montreal, Quebec. Her publication credits include: The art of poetic inquiry, (Backalong Books), a novella, Desperate Freedom, (Brian Wrixon Books Canada), and 2 collections of poetry; The Man Who Stole Father’s Boat, (Backalong Books), and She’s an Island Poet, Desperate Freedom was on the bestseller's list for one week, and The Man Who Stole Father’s Boat is one of hope and encouragement for all those living in the social welfare system. She’s been published in online magazines such as, (regular writer for) ‘Life as a Human’, and Shannon Grissom’s magazine.