flutter The reported phenomenon is alarming Second quarter financial report The company wowed investors this week with its FanDuel betting platform taking market share and dramatically increasing revenue, sending shares up about 8% on Wednesday, even in a state where sports betting and online gaming are mature.
But what’s causing concern is FanDuel’s announcement that it won’t add a surcharge to offset the Illinois tax increase. Earlier this month, competitors draft king Said it would impose a surcharge on consumers in states with the highest sports betting taxes.
DraftKings shares initially fell 5% in after-hours trading after FanDuel was released, and the company quickly reversed course on taxing customers. DraftKings shares recently rose more than 2%.
DraftKings said in a statement: “We always listen to our customers, and after hearing their feedback, we have decided to no longer impose a gaming tax surcharge. We remain committed to providing our loyal customers with the best value in the industry.”
The nominal tax applies to client bonuses in states with multiple operators and tax rates above 20%, including Illinois, New York, Pennsylvania and Vermont. Illinois approved a 40% tax rate for gambling companies with the largest adjusted gross receipts. New York and New Hampshire each maintain a 51% tax rate on sports betting companies.
DraftKings is the first operator to announce such a fee for users, but CEO Jason Robins predicts other sportsbooks will follow suit.
Neither penn entertainment corp. nor rush street interactiveTwo companies operating sportsbooks in Illinois have followed suit with surcharges.
FanDuel said Tuesday it will also skip the surcharge and instead offset the impact of high state taxes with more locally-focused marketing and promotions. The company expects a net impact of $40 million in the second half of 2024.
Peter Jackson, CEO of Flutter, the parent company of FanDuel, said Illinois’ tax increase may actually prove to be a competitive advantage.
“Smaller players may also have to raise prices, which results in us gaining more share, which provides us with an offset,” he said on the company’s earnings call.
Gaming analysts applauded DraftKings’ decision to eliminate the surcharge program.
“We view the decision to remove the surcharge as positive for the story as users were disappointed with the company’s initial decision,” Piper Sandler analyst Matt Farrell wrote in a note.
“This reversal should remove some uncertainty around execution risk (including market share and/or reputational impacts), but also raises questions about how DKNG will offset the impact and/or whether guidance needs to be adjusted,” Truist analyst Barry Jonas said.
FanDuel maintains a 47% share of the U.S. sports betting market in terms of total gaming revenue. It also holds and is defending the leading position in iGaming (online casino gaming) with a 25% share in terms of total gaming revenue.
The competition for iGaming is much fiercer and fiercer as its profits and future growth far exceed those of sports betting.
Operators report that in the first five months of 2024 iGaming revenue $677 million According to the American Gaming Association, it’s legal in only seven states. By comparison, sports betting revenue in 38 states and Washington, D.C., totaled $1 billion during the same period
and a new reportROM game makers Light & Wonder and Vixio predict that if every state that currently allows land-based casinos or sports betting allowed iGaming, total annual gaming revenue would reach $48 billion.
The gaming industry appears to be shrugging off recession fears, even as many other companies that rely on consumers report spending has shrunk.
According to a CNBC/Generation Lab poll, 9% of people between the ages of 18 and 34 said they spend at least $100 per month on online gambling. Three percent of people spend more than $300 a month on online games.
sports betting exchange traded funds, batesIt rose 2% on Wednesday, its third straight day of gains and its best one-day gain since January.
DraftKings shares are down about 9% so far this year, while Flutter shares are up nearly 15%.
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