Illinois lawmakers passing a new budget that includes a tax on the sports betting industry sent shares of DraftKings and other betting companies tumbling on Monday. The legislation imposes a tax on every bet placed in the state, prompting a negative market response.
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Stocks of companies like DraftKings, FanDuel’s parent company Flutter Entertainment, MGM Resorts, and Rush Street Interactive, which operates BetRivers in Illinois, all saw declines. The Roundhill Sports Betting & iGaming ETF also experienced a nearly 2% drop in response to the news.
The new budget levies a tax on each sports bet made in Illinois, charging 25 cents for the first 20 million wagers and 50 cents for every bet beyond that threshold. Governor J.B. Pritzker intends to sign the budget into law, solidifying the implementation of the new tax.
Analysts at Citi projected that DraftKings would have faced an additional $68 million in taxes over the past year if the new tax had been in place. They anticipate that betting companies will likely scale back promotional events in Illinois to offset the increased costs.
Illinois had previously adopted a progressive tax system in its last budget, raising the tax rate from 15% to 40%. The Sports Betting Alliance, representing gaming companies, criticized the new tax as detrimental to the legal market and vowed to challenge the measure.
In a statement, the Sports Betting Alliance expressed disappointment in the legislature’s decision to impose what they termed a “crippling tax” on operators and customers. The group emphasized its commitment to opposing this perceived discriminatory tax.
The move by Illinois lawmakers underscores the ongoing challenges faced by the sports betting industry, particularly in the realm of taxation and regulatory developments. As the sector continues to evolve, companies will need to navigate a complex landscape of legislative changes and market dynamics.
The market reaction to the Illinois tax legislation serves as a reminder of the vulnerability of sports betting stocks to regulatory shifts and policy decisions. Investors and industry players alike will closely monitor how companies adapt to the new tax environment and manage potential financial implications.
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