DraftKings, Flutter, Rush Street Stocks Fall After Illinois Slaps New Betting Tax

Shares of sports betting firms fell on Monday, after lawmakers in Illinois passed a budget proposal that increases taxes on online betting by consumers.

DraftKings (DKNG) stock ended 6% lower. Shares of FanDuel parent Flutter Entertainment (FLUT), and Rush Street Interactive (RSI), which operates BetRivers, fell between 1.1% and 2.7%.

The Roundhill Sports Betting & iGaming ETF (BETZ), which tracks sports betting and online gaming companies, dropped 1.3%.

Illinois lawmakers on Monday approved a budget that includes a tax of $0.25 per wager on the first 20 million online sports bets made each fiscal year, rising to $0.5 per bet after.

Illinois Governer J.B. Pritzker has said he would sign the budget, according to ABC7 Eyewitness News.

Several analysts said that the 'surprise' tax will add millions of dollars in costs for the betting companies.

Citi estimated that DraftKings would have been subject to roughly $68 million in additional taxes. The company as well as FanDual, which are pegged to receive over 20 million bets, will likely scale back the promotional events they run in the state.

Jefferies estimated the impact to be low to mid-single digits on the companies' fiscal 2025 adjusted core earnings before any mitigation efforts. 

The analyst added that the tax also appears to be more difficult to mitigate than traditional gross gaming revenue taxes.

Bank of America expects the effective tax rate for the companies is now over 50%, up from about 35% currently.

"For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market," the Sports Betting Alliance, which represents the gaming companies, said in a statement.

On Stocktwits, the retail sentiment remained 'neutral' for DraftKings, 'bullish' for Flutter, and 'bearish' for Rush Street.

A user remarked that headwinds for the sector never go away. "I was a believer. I'm not anymore," they said.

DKNG shares are down 9.3% this year.

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