DraftKings Ditches Plan to Charge Extra Fees in High-Tax States

By Sean McDonnell
cleveland.com
(TNS)

DraftKings will not be charging winners extra fees in “high tax states” after all, the company announced Tuesday.

The sports-betting company announced that it would scrap its plan to add a “gaming tax surcharge” to winning bets in 2025. This came after two major competitors came out and said they would not add fees.

In a statement posted online and sent to media, DraftKings said it had listened to customers and “after hearing their feedback we have decided not to move forward with the gaming tax surcharge.”

Earlier this month DraftKings said it would charge an extra fee in New York, Pennsylvania, Vermont and Illinois. These states all taxed the gambling revenue that DraftKings collects at higher than 20%.

The fee was designed to make up for revenue lost to the higher taxes charged in those states.

Ohio’s sports-betting tax is exactly 20%, as it is in Massachusetts. Sports bettors and those who watch the industry closely thought that if the fees worked out well in other states that Ohio might see fees down the line.

There was also the open question of whether other sports-betting companies would add fees, but the response so far has been no, according to Sports Betting Dime, cleveland.com’s partner on sports betting coverage.

FanDuel, which along with DraftKings are the two most-used sports-betting apps in the country, said that it had no plans to add a fee in high-tax states. But it will give away less promotional dollars in these states

Penn Entertainment, which runs the ESPN Bet app, also said it had no plans to add a fee. Although, CEO Jay Snowden said they’d watch to see how DraftKings’ plan worked out.

“Expect us to be observers,” Snowden said on an earnings call for investors. “A tax surcharge in early 2025 isn’t even on our radar. However, I hesitate to say never.”

Ohio’s tax rate was initially 10%, but Gov. Mike DeWine successfully pushed to raise it to 20% starting in July 2023, as part of the state’s budget.

“New York’s online sports betting tax rate is 51%, Pennsylvania’s is 36% and Vermont’s is 31%. Illinois has a sliding rate of 20% to 40% depending on the sportsbook’s revenues, but DraftKings would likely pay 40%.

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