DraftKings Backs Off Decision to Add Surcharge in Four States
News Comes After FanDuel Announces No Plan To Hit Clients
DraftKings Reverses Surcharge Plan After FanDuel’s Decision
Sometimes, the last move can be the best. In sports betting news, FanDuel decided it would not follow DraftKings’ plan to add a surcharge to player winnings in four states with high tax rates. DraftKings steps back from this controversial strategy after facing significant backlash.
“We believe that moderating our levels of generosity or reducing local marketing efforts is a more effective response to higher tax rates” Peter Jackson, CEO of DraftKings’ parent company Flutter, said on the earnings call. “We have no plans to institute a surcharge for winners.” Once FD made its decision public, DraftKings steps back quickly from its plan that was scheduled to begin on Jan. 1, 2025.
“We always listen to our customers, and after hearing their feedback, we have decided not to move forward with the gaming tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers” DraftKings said in its reversal statement, as DraftKings steps back from its earlier position.
DraftKings announced the decision to add a surcharge in New York, Vermont, Pennsylvania, and Illinois on Aug. 1. They planned to institute the surcharge for winning bets in states with tax rates above 20% for operators. New York, Vermont, and Pennsylvania’s tax rate stands at 51%, while Illinois is at 40% for betting operators.
The decision received practically unanimous criticism from the betting community, and when FanDuel announced its plan to avoid the surcharge, DraftKings was out there by itself in an extremely vulnerable position among sports betting concerns.
DraftKings Statement on Gaming Tax Surcharge pic.twitter.com/cucbsQJIVD
— DraftKings News (@DraftKingsNews) August 13, 2024
DraftKings’ Surcharge Criticized by Bettors and Experts
The Las Vegas Review-Journal explained why DK’s original decision was problematic:
“If you bet where DraftKings takes 3.2% off winnings, you’re out of your (expletive) mind” said bettor Alan “Boston” Dvorkis. “Don’t do it. You’re not going to win. I don’t care how good you are. There’s no living human that can overcome that.”
Bettors must win 52.4 percent of their wagers to turn a profit against a -110 price. Under the new surcharge, which equates to -114, gamblers would have to win 53.3 percent of their wagers to make a profit.
One legendary bettor, Billy Walters, saw DraftKings’ original plan as one that would be damaging to U.S. betting operators. “What they’re doing now, as far as what they’re charging people, they’re just going to drive people right back to the offshore (sportsbooks),” Walters said. “That’s all they’re going to do. The offshore world’s going to be bigger than ever.”
DraftKings’ decision was an important discussion point at the BetBash convention in Las Vegas.DraftKings’ plan to add a surcharge to winning bets in some states was a main talking point at Bet Bash, a sports betting networking conference at Circa.
Jackson added more on what went into the decision by FanDuel not to follow DraftKings’ strategy.
“We often find that smaller players may raise prices, which helps us capture more share” Jackson said on a conference call. “We believe moderating local marketing is the best option and have no plans to introduce a surcharge on winners.”
For breaking news, betting analysis and more, visit Point Spreads Sports Magazine
Updated to reflect $DKNG decision. https://t.co/7ngllIMZqN
— ETF Godfather (@ETFGodfather) August 13, 2024
