The sports betting operator announced the news ahead of its Q2 earnings call, which will take place Friday morning. DraftKings’ surcharge is expected to go into effect in the four states on Jan. 1.
The creation of the surcharge was referred to as a “solution” to sizable and growing tax rates.
“There is a solution here,” DraftKings CEO Jason Robins said in a letter to shareholders. “As you know, many revenue-based taxes are ed along to the consumer. The online gaming industry has not pursued this approach in lower tax jurisdictions, but it has in higher tax jurisdictions such as .”
Illinois raised its tax rate earlier this year, and New York (51%) and Pennsylvania (36%) are states with large populations and significant tax rates compared to other jurisdictions. Robins believes the surcharge effectively alleviates some of the financial challenges posed by the tax rate.
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DraftKings’ letter to shareholders didn’t mention specifics on the size of the surcharge, but Robins wrote “the surcharge will be fairly nominal to the consumer.” In Illinois, Robins says the surcharge will be a “low to mid-single digit percentage” of a customer’s net winnings.
The sports betting operator’s Q2 earnings presentation mentions that the gaming surcharge will be mentioned on bet slips for bettors wagering in those states. The letter to stakeholders also says Robins believes the move is beneficial for the company and creates additional potential upside for the company’s Adjusted EBITDA in 2025.
It’s unclear whether other major FanDuel might follow suit.
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The initial reaction to the news was not well-received by sports bettors, who aren’t eager to pay a surcharge on winning wagers. Robins’ line about the surcharge being “nominal” likely doesn’t sit well with bettors.
“DraftKings will be adding a SURCHARGE to be subtracted from YOUR net winnings to pay for THEIR TAX on gambling revenue,” professional sports bettor and Unabated Co-Founder Captain Jack Andrews (pseudonym) wrote on X. “The money they make from losing bettors. Wow. Just wow.”
Professional sports bettor Gadoon “Spanky” Kyrollos called the surcharge “Insane!” in a reply to Andrews’ post.
Customer frustrations will likely be a topic of discussion Friday when Robins addresses investors on the company’s earnings call.
