Bigger online betting firms to bear brunt from Illinois tax hike
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BIGGER ONLINE BETTING FIRMS TO BEAR BRUNT FROM ILLINOIS TAX HIKE
The Illinois Senate is taking aim at the big online bookies in its most recent budget, by approving a tax hike that the likes of Flutter Entertainment FLTRF.L and DraftKings DKNG.O may feel most acutely, analysts say.
On Sunday, the Illinois Senate passed a budget that will double the tax rate for the largest online sports betting operators in the state.
The new proposed tax structure, based on market share, ranges from 20% to 40% of the operators' adjusted gross revenue (AGR). The bill, if passed in the House, would become effective from July 1.
MoffettNathanson analysts say Flutter's FanDuel brand and DraftKings dominate the state's sports betting market, together generating over $780 million in AGR, while the remaining generate just under $280 million.
"This (tax structure) would squarely put both FanDuel and DraftKings in the highest bracket, while all the other operators fall below the $100 million threshold," notes Robert Fishman, senior research analyst at MoffettNathanson.
Analysts estimate the new structure would imply FanDuel's tax obligation could increase in the range of $83-102 million, while DraftKings' tax bill could rise between $59-78 million.
"It's unclear what the operators can/will do to respond, aside from reducing promos/odds which could empower the illegal market, being counterproductive to the state's goals," says Barry Jonas, analyst at Truist Securities.
Wells Fargo calculates the total liability for betting operators in Illinois would rise to $314 million from $150 million.
Most analysts believe it is unlikely that other U.S. states will follow Illinois in the near term.
DraftKing shares were down around 1.6% in Wednesday's premarket, while Flutter shares were down almost 1% in London.
(Roshan Abraham)
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