Introduction to Online Betting Fee
The United States’ largest online betting operator, Fanduel, will introduce a surcharge on customer bets in Illinois from September. This decision was made by its owner, Flutter, in response to the state legislature’s recent decision to add a new tax on wagers from next month.
Reason Behind the Surcharge
The 50-cent transaction fee on each bet placed in Illinois is a direct result of the state’s new tax, which will significantly impact the sector’s dominant players, Fanduel and DraftKings. Fanduel, which has a 43% share of the U.S. sports betting market, will remove the transaction fee immediately if the state reverses its decision at any point.
Previous Decisions on Tax Hikes
Flutter had opted not to introduce a charge when Illinois hiked its tax rate on betting firms last year. However, DraftKings had initially planned to add a charge on customer winnings in high-tax states but reversed the plans following customer feedback. Flutter’s Chief Executive, Peter Jackson, believed that the best response to higher taxes was to cut local marketing or moderate customer offers, a strategy that offset around 50% of the 2024 Illinois tax rise.
Impact of the New Tax
Flutter stated that while extensive efforts were made to absorb the cost of last year’s tax hike without impacting customers, it was disappointed that Illinois’ new tax will punish larger operators. Jackson emphasized that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth, and maximize revenue for states over time.
Financial Implications
Analysts estimated that the new Illinois tax would hit Flutter’s core profit by around $74 million in a full year without any mitigation measures. However, Flutter expects to grow its group-wide profit by 35% year-on-year to $3.18 billion this year, with just over a third coming from the rapidly growing U.S. market.
Conclusion
The introduction of a surcharge on customer bets in Illinois is a significant development in the online betting industry. As the industry continues to grow and evolve, it is crucial for operators, regulators, and customers to work together to find a balance between taxation and profitability. By understanding the impact of tax rates on the industry, we can create a more sustainable and equitable environment for all stakeholders involved.
