* Crain’s…
As Pritzker and Illinois lawmakers search for ways to shore up the state’s budget as federal COVID dollars dissipate, they targeted the sports betting tax. Though Pritzker’s initial proposal would have hiked the tax from 15% to 35%, lawmakers subbed the flat tax for a tiered structure they contend would make more than the governor’s original $200 million revenue goal. […]
In a statement this weekend, Sports Betting Alliance President Jeremy Kudon called the Illinois Senate’s move [to pass the bill] “extremely disappointing.”
“This tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers — not to mention provide a massive leg up to dangerous, unregulated and illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations,” Kudon said, threatening to pull sportsbooks out of the state. “Sportsbooks across the industry will have no choice but to re-evaluate their level of investment and participation in the state should this become law.”
* As I write this, DraftKings stock price is down about 11 percent. Flutter Entertainment, which owns FanDuel, is down almost 7 percent.
* Casino.org…
In a report to clients today, Deutsche Bank analyst Carlo Santarelli said the Illinois tax hike isn’t “overly draconian for the operators, and of little consequence to the majority of the operators in the state.”
However, he cautioned that other cash-strapped states could be inspired by the move in Illinois and be compelled to boost their own sports wagering taxes. The analyst observed that owing to currently accommodative rates, Michigan and New Jersey could eventually implement “punitive” increases to their sports betting levies. […]
In report out Tuesday, Morgan Stanley said DraftKings and Flutter can trim marketing and promotional spending in Illinois to offset some of the headwinds caused by the elevated tax while adding the new policy creates an overhang for the operators. […]
Oppenheimer analyst Jed Kelly told clients the two operators [FanDuel and DraftKings] could leverage rising taxes to advance consolidation, adding that unfavorable legislative outcomes are buying opportunities in DraftKings. He rates the stock “outperform” with a $60 price target, implying upside of 71.8% from current levels.
* Yahoo! Finance reiterates the spread to other states worry…
Well, the thought here from analysts is that the potential here for other states to follow suit… That is really the primary concern of analysts, of investors.
- Socially DIstant watcher - Tuesday, May 28, 24 @ 11:51 am:
What kind of odds are they offering that the sky will actually fall?
- Three Dimensional Checkers - Tuesday, May 28, 24 @ 11:57 am:
Or people might just keep betting on sports no matter the tax rate because they love and are addicted to betting on sports.
- May soon be required - Tuesday, May 28, 24 @ 12:02 pm:
Hopefully the tax increase will incentivize them to advertise less
- MG85 - Tuesday, May 28, 24 @ 12:04 pm:
==Kudon said, threatening to pull sportsbooks out of the state.==
What is the logic here? We can’t tax things because criminals aren’t taxed? Doesn’t that mean no product or service should ever be taxed?
Also, if the logic here is an increase on their service will mean less profit then they will leave altogether, then I’m sure there competitors will happily pick up their market share. Sure, if you make 150 million dollars in profit but lose 10 million to taxes that is a reduction, but leaving the state would mean you would lose the other 140 million dollars. That’s a terrible business model.
And lastly, these businesses rely on state and local governments to catch, deter, and prosecute those fraudster criminals who encroach on their legitimate business. How does Kudon the Crouton think those services are paid for, by thoughts and prayers? Lawyers and prosecutors aint cheap ya know.
- Larry Bowa Jr. - Tuesday, May 28, 24 @ 12:18 pm:
“Sportsbooks across the industry will have no choice but to re-evaluate their level of investment and participation in the state should this become law.”
I don’t see the downside here. Does this mean I’d get to watch more than 2 minutes of a sporting event without gambling ads aimed at dullards getting blasted into my eyes and ears?
If I was in an industry that contributes less than nothing to society I’d consider not crying about the injustice of being taxed on all my rent seeking.
- Homebody - Tuesday, May 28, 24 @ 12:20 pm:
I’m not going to feel bad for investors trying to get rich off average people gambling away their discretionary income (and then some) and has some pretty significant negative externalities being unable to get as wildly rich as they previously hoped.
- Simply Sayin' - Tuesday, May 28, 24 @ 12:26 pm:
==Kudon said, threatening to pull sportsbooks out of the state.==
Good riddance.
- TJ - Tuesday, May 28, 24 @ 12:40 pm:
Sportsbooks, and other gambling establishments and apps/sites, should absolutely be sin taxed more than they are. They’re degenerate trash designed to prey up on easily addicted gamblers and people with poor fiscal habits.
By all means, pull sportsbooks out of Illinois.
- Carol Taylor - Tuesday, May 28, 24 @ 12:46 pm:
Sports gambling corrupts the honest competition of the Sport. Sad but true and it ought to be acknowledged. Millions of dollars on the line for those making the Book is ample incentive to create situations which unfairly advantage or disadvantage one side or the other.
- NickNombre - Tuesday, May 28, 24 @ 2:01 pm:
“In report out Tuesday, Morgan Stanley said DraftKings and Flutter can trim marketing and promotional spending in Illinois to offset some of the headwinds caused by the elevated tax”
I don’t have anything against gambling, but I could do without the constant barrage of ads. Is it too late to replace the rate increase with a tax on gambling ads? /s
- @misterjayem - Tuesday, May 28, 24 @ 2:08 pm:
“But what if other states also put the interests of their citizens first?”
Not exactly the powerful argument that the sportsbooks might think it is.
– MrJM
- Jeremy Kudon - Tuesday, May 28, 24 @ 2:47 pm:
Hi! Long time reader, first time commenter. Just want to clarify a few things. First, I’m a lobbyist (like many of you), I don’t have the power to make anyone exit the market. The statement just reiterates something that I imagine is pretty straightforward–if your taxes doubled or tripled you would have to either make cuts or move to another state. In either scenario, there will be real life consequences for my clients’ Illinois partners, which is not great for anyone involved. Second, I get it - not everyone loves the ads. Trust me, I feel the same way about Geico and Flo or Jake and State Farm. But the ads help bring in customers, which helps grow the market and generate more tax revenue for the state. Less ads = less customers and, ergo, less revenue for the state. Maybe I’m mistaken, but that seems contrary to the intent of the legislation. Third, I don’t think the sky will fall. Illinois has always thrown up some unique obstacles when it comes to gaming legislation–whether it was the 70% tax on casinos in 2003 or the on-site registration requirement for sports betting in 2019. We are just frustrated that the State adopted an unprecedented and untested tax framework with less than 48 hours notice. And I mean that - no state or country has ever adopted a graduated tax rate for online gaming. I know–welcome to Springfield! I hear you (and as some of you know, I’ve been involved in legislative battles here since 2009) but I also think it’s OK to express just a bit of frustration when things could be done in a slightly better way. I think the Governor and legislature have gotten a lot of things right over the past 5 years, including legalizing sports betting in 2019.
Again, appreciate all the great work that the Millers do and hope to get a better outcome the next time.
- Last Bull Moose - Tuesday, May 28, 24 @ 2:59 pm:
Not a fan of sports betting but would rather have lightly taxed regulated sport betting than untaxed, unregulated, sports betting.
- Chicagonk - Tuesday, May 28, 24 @ 3:09 pm:
Sportsbooks are fairly low margin for casinos. I read through the Draftkings earning call and the big push will be iGaming, which is just a tax on gambling addicts collected by casinos and the state.
- charles in charge - Tuesday, May 28, 24 @ 3:33 pm:
==if your taxes doubled or tripled you would have to either make cuts or move to another state.==
That is, unless you’re able to continue making money hand over fist despite the increased taxation, in which case you just hire a bunch of lobbyists to loudly cry wolf about leaving the state.
==We are just frustrated that the State adopted an unprecedented and untested tax framework with less than 48 hours notice. And I mean that - no state or country has ever adopted a graduated tax rate for online gaming.==
Oh my heavens, unprecedented and untested in the entire six-year history of legalized online sports gambling?! The sky must be falling.
- May soon be required - Tuesday, May 28, 24 @ 3:55 pm:
==I get it - not everyone loves the ads. Trust me, I feel the same way about Geico and Flo or Jake and State Farm==
I really don’t mind if my kids grow up and buy Geico or State Farm insurance because they saw so many of their ads. I’d rather they not think that betting on every sporting event is normal human behavior.
I don’t feel any sympathy for your clients.
- low level - Tuesday, May 28, 24 @ 4:15 pm:
Jeremy, your comparisons are poorly formed and you havent done your clients any good. Next time, dont hit the “Say It” key after going on a rant.
At any rate, thank you for talking down the stock prices. I’ll be buying the puts tomorrow on DKNG and FLUT.
- Rabid - Tuesday, May 28, 24 @ 7:24 pm:
These are losing bets. Who cares
- Excitable Boy - Tuesday, May 28, 24 @ 8:21 pm:
- The statement just reiterates something that I imagine is pretty straightforward–if your taxes doubled or tripled you would have to either make cuts or move to another state. -
Thanks for the condescending Econ 101 nonsense, you’re obviously much smarter than everyone here. The third option is you live with a smaller astronomical profits to continue having access to Illinois gamblers.
- low level - Tuesday, May 28, 24 @ 9:16 pm:
==Thanks for the condescending Econ 101 nonsense==
Love it. You win the internet today. Well done.