Pennsylvania Sports Betting Surcharge Gets Nixed

It turns out DraftKings and FanDuel will not be adding a surcharge to Pennsylvania sports betting winnings after all.

This idea was first broached by DraftKings. They are trying to offset the fees in taxes for online sportsbooks in Pennsylvania.

Customers, of course, were not thrilled with the proposal. And understandably so. This plan amounts to passing business expenses onto the consumer. That’s not something customers typically support. Especially when it comes to lucrative industries with opaque business models like sports betting in the United States.

Eventually, DraftKings walked back their surcharge consideration. What is prompting the change of tune? How does FanDuel factor into the equation? And while Pennsylvania sports betting surcharges aren’t inbound for now, is there any chance that changes in the future?

FanDuel Played Role in Downfall of Pennsylvania Sports Betting Surcharge

It seems FanDuel played a major role in overturning the plan to include surcharges for Pennsylvania sports betting. Granted, it isn’t an official role. But it doesn’t take a rocket scientist to connect the dots.

After the plan was initiated by DraftKings, FanDuel spoke on the matter during a recent earnings call. As PlayPennsylvania’s Corey Sharp writes, FanDuel explicitly stated their intention to not follow DraftKings’ lead:

“Flutter CEO, Peter Jackson, said on the company’s second-quarter earnings call late Tuesday that FanDuel had ‘no plans to introduce a surcharge for winners.’ FanDuel’s chief rival, DraftKings, had said it would impose a surcharge on winning bettors in Pennsylvania beginning in January of 2025. But, to date, no other operator has announced it will follow suit and add a surcharge on winnings.

“Less than an hour after Flutter’s call ended, after the company was clear it would not follow DraftKings’ lead, DraftKings released the following statement: ‘We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers.’”

You are not alone if you find this funny. It is, in fact, outright hysterical.

As the two biggest online sportsbooks in the United States, FanDuel and DraftKings are direct competitors. Rivals, even. And yet, it sure sounds like DraftKings was hoping for FanDuel to back their play to implement a Pennsylvania sports betting tax on customer winnings.

DraftKings’ Surcharge Proposal Would Have Impacted States Other Than Pennsylvania

While DraftKings’ planned sports betting tax made the loudest headlines in Pennsylvania, The State of Independence isn’t the only market that was going to be impacted. According to the initiative, the company would have assessed fees on sports betting winnings in any market with a sportsbook tax rate of 20 percent or higher.

Pennsylvania and its 36 percent tax rate on sportsbooks were obvious inclusions. However, the language also would have applied to sports betting in New York, sports betting in Vermont and sports betting in Illinois. Following the decision to double the Ohio sports betting tax rate from 10 percent to 20 percent, The Buckeye State likely would be impacted as well.

The list doesn’t technically end there, either. Sports betting in Delaware assesses a 50 percent tax rate to operators. Meanwhile, sports betting in Arkansas, charges 20 percent fees to online operators specifically. Sports betting in New Hampshire and sports betting in Rhode Island each have a 51 percent tax rate—just like New York. There is also a 20 percent tax rate for sportsbooks in Massachusetts.

Put simply, this proposal by DraftKings would have significantly influenced the sports betting landscape throughout the United States if they went through with it. And from the sound of things, they may have done just that if FanDuel or any of the other online sportsbooks in the United States supported their stance.

This Probably Isn’t The Last We Will Hear of Taxes Placed Upon Sports Betting Winnings

Everything we are discussing must be couched with a major caveat: This could all change sometime in the near future. Indeed, Pennsylvania sports betting will not feature surcharges on winnings. But that’s just for now. This issue will resurface in The State of Independence as well as in other markets.

Truth be told, it’s unavoidable. Online sports betting in the United States is a growth industry, but there are limits to how much it can actually grow. After all, there are only a finite number of people. That means there’s a cap on the number of customers these sportsbooks can hope to bag.

These circumstances will invariably lead to companies attempting to figure out ways that they can increase profit margins and appease their shareholders. And that, in all likelihood, will entail passing on expenses to consumers.

What Would Surcharges Look Like for Sports Bettors in the United States?

We can liken this dilemma to the streaming industry. What have services like NetFlix, Hulu, MAX, Peacock et al. done as their rate of subscriber growth slows down? They have increased the cost of their subscriptions.

No, this is not a picture-perfect analog. As of now, betting on sports in the United States doesn’t necessarily incur any direct fees. But you are putting your own money on the line and, in many cases, losing it whenever your bet doesn’t pan out. The average amount you lose across any given month or year can be considered your subscription cost.
Regardless, we should probably brace for more conversations on this subject as sportsbooks look for ways to maintain profit margins. This could lead to surcharges on winning bets. It could also culminate in higher (or actual) processing fees for deposits. Heck, sportsbooks could theoretically charge a monthly cost just to access their website and submit wagers.

To be sure, we’re not predicting any of this. But it’s all certainly possible. And it’s all definitely worth keeping in mind as sports betting in the USA becomes more of a veteran industry.

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: