Surcharge Meant to Offset Rising Taxes
DraftKings' idea for a surcharge was meant to combat rising tax rates on sports betting operators. The four markets they targeted had the highest rates in the country, a couple of which had recently enacted significant hikes. Operators have threatened to recuperate the losses from customers, thinking it would lead to them pressuring the state to keep rates low.
Unfortunately for DraftKings, that didn’t happen. Instead, the public was furious with the company, pointing to the amount of revenue they have been generating. State legislatures echoed the public outcry, which led to other sportsbooks refusing to take similar measures.
DraftKings Failure Could Have Long-Term Effects
DraftKings took a major gamble by announcing their idea for a new surcharge. It and other sportsbooks have been threatening to take action, but this marked the first attempt to do so. The plan's failure will undoubtedly have a significant impact on the balance between the states and operators.
DraftKings’ decision not to implement the surcharge will almost certainly lead to more states making significant changes to sports betting operator tax rates. The lack of coordination between operators will also cause a massive public outcry from bettors, showing that the states have the upper hand for now.
FanDuel Sees Stock Surge
One of the biggest reasons for DraftKings’ decision to cancel the planned surcharge was FanDuel's decision not to follow suit. FanDuel owner Flutter publicly came out against the idea of a surcharge, promising not to enact their own. FanDuel is DraftKings'
After Flutter confirmed they would not be adding a surcharge, they saw an increase in their stock price of almost 10%. Conversely, DraftKings saw its price drop to its lowest level in nine months.
