Sports betting operations across Illinois came to a halt on Tuesday after the State Senate passed a new bill.
Passed on Sunday, the new bill proposes higher taxes on online sports betting activities in the state. The news has affected some top online Sportsbooks USA since the new tax regime can vary from 20% to 40%.
The tax rate will be decided based on the operators’ yearly revenue. Till now, operators have been paying a 15% tax, which was introduced back in June 2021. Governor Pritzker was the one to propose a 35% tax on such activities earlier this year.
As expected, the news brought a wave of skepticism across the market. Names like DraftKings, Flutter Entertainment, etc., witnessed a steep drop in stock prices following the announcement. The dip was noted at 6.96% for DraftKinfs and 4.39% for Flutter Entertainment.
While the proposal has only made its way into Illinois, operators from other states are also fearing its implications. The US boasts several renowned operators, including DraftKings (DKNG), FanDuel, BetMGM, MGM Resorts (MGM), ESPN Bet (PENN), Fanatics Sportsbook, Bally (BALY), BetRivers (RSI), Caesars Sportsbook (CZR), Tipico, PointsBet (owned by Fanatics), Hard Rock Casino, Wynn Bet (WYNN), GAN Limited, Circa Sports, Inspired Entertainment (INSE), and Station Casinos.
Bernie McTernan, the analyst on Wall Street, also believes that the forecast for higher taxes will put pressure on DraftKings’ adjusted EBITDA. However, it will still be less than the operator estimated for tax payments of 44 million dollars.
For PENN Entertainment and Rush Street Interactive, the proposed progressive tax means a lower tax slab than DraftKings based on their yearly revenue and market share. Given the complications the proposed rate is bringing, it is expected to bring about massive shifts in the market dynamics.
