DraftKings Expects to Loses $50 Million in 2025 After Illinois Sports Betting Tax Hike

A recent increase in Illinois sports betting tax is expected to cost DraftKings sportsbook more than $50 million during the 2025 calendar year.

These projections come from the company themselves. And their release coincides with a recently scrapped plan by DraftKings to implement surcharges throughout certain markets. Illinois, of course, was one of the markets in which DraftKings considered adding fees to player winnings.

It is no coincidence that the now-defunct proposal aligns with tax hikes for online sportsbooks in Illinois. In fact, The Prairie State is among the inspirations for DraftKings’ surcharge initiative.

“DraftKings expects to lose $50 million next year from a recent tax hike in Illinois, which upped the top rate larger sportsbooks pay from 15% to 40%,” writes Legal Sports Report’s Sam McQuillan. “The Sports Betting Alliance, a chief lobbying arm for online sportsbooks, cautioned that it will fuel the black market, and worsen products, promotions, and odds.”

Though this fallout is specific to Illinois, other states have authorized tax hikes as well. More states will likely consider increases in the future. While the new Illinois sports betting tax model is considered a blueprint for other markets, problems could arise for consumers as sportsbooks try offsetting their additional overhead.

Full Details of the Illinois Sports Betting Tax Increase

The Illinois sports betting tax officially changed earlier this summer. As CBS Sports’

Pete Truszkowski and Nick Stellini note, The Prairie State is the first to introduce a progressive tax model:

“Illinois is the first state to adopt a progressive tax rate for sportsbook operators. Sportsbooks will pay taxes based on their gross revenue. Here’s the breakdown:

• 20% tax rate on gross revenue up to $30 million

• 25% tax rate on gross revenue between $30-$50 million

• 30% tax rate on gross revenue between $50-$100 million

• 35% tax rate on gross revenue between $100-$200 million

• 40% tax rate on gross revenue over $200 million

DraftKings and FanDuel have already passed $200 million in gross revenue for 2024, meaning every dollar they earn for the rest of the year will be taxed at 40%. BetRivers and Fanatics have surpassed $50 million, meaning their tax rate has doubled from the previous number.” 

Previously, Illinois online sportsbooks paid a flat tax rate of 15 percent. As the above figures show, then, this will mark a sizable increase for any operators with meaningful market shares.

How will Sportsbooks Attempt to Recoup Money Following Tax Hikes?

After an overwhelming amount of opposition, DraftKings has decided not to pursue adding surcharges to player winnings. Customers are not the only ones vehemently against it, either. Even FanDuel has said they will not consider adding surcharges to winning bets.

Still, online sports betting in the United States remains a business. Companies are in this industry to make money. Online operators such as FanDuel and DraftKings will not simply accept tax-rate increases in Illinois and elsewhere without attempting to balance out their scales. The question is: If not through surcharges, how will they go about doing that?

Some have wondered whether online sportsbooks in the USA may consider a subscription model. In this scenario, users must pay a monthly fee to access and use the sportsbooks. However, this isn’t much different from a surcharge on winnings. It’s more predictable, because it would be a flat fee. But the idea of paying money just to potentially lose money may not sit right with consumers.

Certain analysts have mused that sportsbooks may consider varying odds by market. Let’s use the Illinois sports betting market as an example. Under this model, users in The Prairie State would see less favorable betting odds compared to customers in markets with lower tax rates such as Tennessee (under 2 percent). 

Experts have by and large dismissed this as a non-starter. Inconsistent odds across markets will be considered a turnoff for bettors.

Online Sportsbook Bonuses Could Suffer as a Result of Tax Increases

One arena that’s expected to undergo significant change is Illinois sports betting bonuses. In fact, Fanduel basically confirmed as much when asked about the tax increase.

“We believe that moderating our levels of generosity or reducing local marketing efforts is a more effective response to higher tax rates,” says Peter Jackson, CEO of FanDuel’s parent company Flutter (via McQuillan).

This sounds correct on its face. Especially with regards to marketing. Regulators are growing increasingly concerned with sports betting advertising practices in the United States. Some markets are already having discussions on whether to set limits for individual companies. It sounds like higher tax rates may organically reel in this practice.

Online sports betting bonuses are a different story. They are likely preferred over surcharges on winning bets. This way, the costs aren’t directly felt by customers. They are simply ingrained into the overall business practice.

At the same time, online sportsbook bonuses have proven integral to drawing in long-term customers and increasing market shares. If promotions are suddenly harder to come by, or just less bettor-friendly, it may have an adverse impact on bottom lines anyway.

Right now, it’s impossible to say what the official response will be to higher Illinois sports betting taxes. The same goes for every other market. This will likely be a process of trial and error. With all of that said, customers would be wise to stay on top of the issue. One way or another, the higher tax rates assigned to online sportsbooks will invariably impact the overall betting experience.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: