DraftKings CEO Jason Robins is fighting back against high tax rates on sports betting operators with the announcement of a new surcharge on winning wagers starting January 1, 2025. The new surcharge will only apply in states where the current tax rate is 20 percent or higher. Robins framed the new surcharge as a necessity and has been warning investors and lawmakers about this option for a long time.
Robins explained his strategy in an earnings call to investors late last week and provided some details on how the surcharge would work. In his scenario, a $10 bet that earns $20 would be subject to a $.32 surcharge. He went on to say that he didn’t really think it would have much of an impact on customers one way or the other. “People may gripe about it, but I don’t really see behavior change because of it,” he said.
It’s important to note that Robings is planning on implementing a surcharge, not an increased vig. “If you look at the way it’s typically done in other industries, whether it be hotel taxes, or even the sales tax that you pay when you buy something at the store, taxis, you name it, it’s typically line itemed out separately and usually 100% passed along to the consumer. In this case, we’re obviously subsidizing a chunk of it,” he said.
Robins was quick to point out that DraftKings would not be hiding the surcharge from its customers saying, “I know there’s maybe benefit to hiding it because maybe people don’t notice, but I think over the long term customers appreciate transparency. And even if they don’t love that, their state implemented a high tax, and some of that has been passed along. I think they prefer that to not knowing if it was buried in the pricing or something else.”
If successful, it’s likely that many or most US-facing bookmakers will follow suit.