DraftKings Abandons Sports Betting Surcharge Plan Following Criticism in New York
DraftKings has scrapped its controversial plan to add a surcharge on winning sports bets in states with high taxes, following sharp criticism from New York regulators and pushback from customers and competitors. The decision comes just two weeks after the company first announced the fee, which was intended to help offset the costs of steep tax rates in states like New York, where sports betting is taxed at 51%.
Criticism from New York State Gaming Commission
Brian O’Dwyer, Chair of the New York State Gaming Commission, voiced strong disapproval of DraftKings’ proposed surcharge at a recent commission meeting.
O’Dwyer expressed concerns that the fee would mislead and harm consumers, especially in a state with such high tax rates.
He emphasized the commission’s commitment to consumer protection, noting that while DraftKings had abandoned the plan, regulators would remain vigilant to prevent any future policies that could negatively impact bettors.
New York’s strict approach to safeguarding the interests of consumers in the rapidly growing mobile sports betting market is clear.
The state’s 51% tax rate on sportsbook earnings—one of the highest in the nation—has generated significant revenue, with over $50 million allocated to education funding since the start of the NFL season.
Despite the high tax burden, the state remains firm in maintaining its consumer-first stance.
Customer and Competitor Pushback
DraftKings introduced the surcharge plan on August 1, 2024, shortly after reporting its second-quarter earnings.
The plan was met with immediate resistance from both customers and industry rivals. Competitors like FanDuel and Rush Street Interactive quickly distanced themselves from the idea, with FanDuel’s parent company, Flutter Entertainment, making it clear they had no intention of imposing similar fees on winning bets.
Within hours of FanDuel’s announcement, DraftKings reversed its decision, citing customer feedback as the primary reason for scrapping the surcharge.
Despite the rollback, sports betting operators like DraftKings and FanDuel continue to face financial pressures from high tax rates in key markets like New York, Illinois, and Pennsylvania.
Illinois, in particular, has recently introduced a new tax structure that has further increased the burden on major sportsbooks.
While DraftKings CEO Jason Robins has suggested that operators cannot continue to absorb rising taxes indefinitely, FanDuel has indicated it may reduce promotional offers in certain states to cope with the growing tax obligations.
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