At the beginning of August, DraftKings’ co-founder and current CEO Jason Robins announced the company’s intentions to implement a surcharge on winning bets within states where gambling operators are required to pay high taxes. The decision was met with a lot of backlash, and on Tuesday, FanDuel announced that its winning customers will not be subject to such extra costs. Not long after, DraftKings revealed that the company would not follow through with the idea either.
The Surcharge Tax Was Set to Affect Winners in Several States
Had DraftKings moved forward with the cost increase, bettors residing in states such as New York and now Illinois, where government-mandated betting taxes are considered exceptionally high (over 20%), would have started paying extra for each winning wager from January 1st, 2025.
When speaking with CNBC, Jason Robins said the company’s leadership was following in the footsteps of other industries that have faced similar financial burdens and, thus, saw surcharging as the best option. He also stated that the measure was supposed to serve as a warning to regulators regarding high tax rates, seeing as, according to him, companies could not invest in their product and customer experience sufficiently when taxes exceeded “a certain level.” As reported by CNBC, Robins had told shareholders that the surcharge amount would have been negligible for customers. A $10 bet, for instance, would have cost 30 cents if the player won $20.
“Obviously, we could see some customers drop off,” he added when speaking about the potential negative consequences of the surcharge. However, it now seems the backlash following the announcement was more than what DraftKings’ leadership team had initially predicted.
DraftKings Likely Stood to Lose Plenty of Customers
Jason Robins’ August 1st announcement was immediately followed by complaints on various social media platforms, with multiple DraftKings clients on Reddit and X (formerly Twitter) stating their intentions to move to another sportsbook because of the surcharge. The company’s stock price also suffered an over 10% drop on the following day.
Industry players were concerned as well, as revealed by the newspaper Las Vegas Review-Journal. During the Bet Bash networking conference, bookmakers located in Las Vegas and veteran bettors alike expressed concerns about what DraftKings’ surcharge plans spelled for the US betting industry as a whole and believed customers were being mistreated. Chris Andrews, director of the South Point sportsbook, also stated that regulators should do something to prevent surcharges, or else the situation was “headed for a bad ending.”
Another worry among bettors across the country was FanDuel’s response, as given its position as DraftKings’ main competitor, FanDuel going the same route as DraftKings would have inspired other betting operators to follow suit. These concerns were dispelled yesterday when FanDuel made it clear that the company had no plans to implement a surcharge.
It appears that sometime amid this prolonged backlash, DraftKings leadership began doubting its decision, and after the news of FanDuel’s stance on the matter became public, DraftKings announced that its own surcharge plans had been canceled. “We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge,” read the DraftKings’ official statement on social media platform X.
