Nearly two weeks ago, DraftKings Sportsbook was set to implement a gaming tax surcharge on winning bets in states that feature tax rates over 20%, including New York sports betting users.
At the time, DraftKings CEO Jason Robins said that “there wouldn’t be any reason” for the company to change its mind on the strategy. Although, he added, that “obviously we’re paying close attention to customer feedback.
“And if we hear anything that makes us change our mind, we’ll certainly let you know.”
Apparently, customer feedback is all DraftKings needed to change its mind.
On Tuesday, the sportsbook decided to scrap its plans to integrate the surcharge.
DraftKings: ‘Always committed to delivering best value’
In a statement, DraftKings noted that it will “always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge.
“We are always committed to delivering the best value in the industry to our loyal customers.”
This, of course, came less than two weeks after DraftKings Sportsbook NY planned to institute a gaming tax surcharge on winning bets in the state starting on Jan. 1, 2025, to help supplement the sky-high 51% tax rate.
At the time, Robins said the fee would be “nominal” for DraftKings users. He noted that the high tax rate prevented NY sportsbooks from offering promotions and bonuses for bettors, and this surcharge would allow DraftKings “to make the investments in product and promotions and marketing and all the other things that should continue to create long term growth.”
Decision comes on heels of competitors’ responses to surcharge
Since DraftKings announced the surcharge, other NY sportsbook operators have since commented on the development.
Just days after DraftKings detailed the strategy, Rush Street Interactive, owner of BetRivers Sportsbook NY, noted that following in DraftKings’ footsteps was not the right move, calling it “an easy decision for us.”
“We believe that RSI’s focus on customer satisfaction,” Rush Street CEO Richard Schwartz said during the company’s earnings call, “coupled with its innovative rewards and loyalty programs, sets a benchmark for excellence in the online gaming industry.”
Soon after, Penn Entertainment called DraftKings’ strategy “very interesting,” noting that it was “unexpected” and that Penn – operator of the soon-to-launch ESPN Bet NY – would “be observers.”
But the final deciding factor may have been from DraftKings’ No. 1 competitor FanDuel.
Flutter may have swayed DraftKings from surcharge
Flutter Entertainment, which runs FanDuel Sportsbook NY, held its second-quarter earnings call on Tuesday, precipitating DraftKings’ sudden heel-turn on the surcharge.
Within that call, Flutter CEO Peter Jackson said that “there’s a happy medium for tax rates that enables operators to maximize market growth, provides the best experience for customers and over time, maximizes revenue for states.”
He added that most states have taken “a sensible approach to date” but that high tax rates could potentially drive customers to offshore sportsbooks.
He then emphasized that “we think that the moderating levels of generosity are reducing local marketing is the best customer option and we have no plans to introduce a surcharge for winners.”
One investor did wonder why, “as a market leader,” why Flutter doesn’t institute a surcharge considering “no one’s really at a competitive disadvantage” if FanDuel and DraftKings both implement it.
Jackson, however, rebuffed the inquiry: “I don’t have anything further to say.”
