DraftKings, FanDuel Owner's Stocks Drop as Illinois Looks to Raise Sports-Betting Tax

By Dean Seal

Shares of DraftKings and FanDuel parent company Flutter Entertainment after the upper chamber of the Illinois legislature agreed to raise taxes on sports betting.

DraftKings stock was down 8.1% at $37.49 in premarket trading, while Flutter stock was down 4.8% at $194.31. Both stocks had gained about 15% year-to-date when the market closed last week.

According to media reports, Illinois senators have approved a 2025 budget that would raise the state's sports-betting tax, with a progressive tax rate for sports-betting operators based on revenue.

That would have the largest operators, including DraftKings and FanDuel, paying a mid-to-high 30% effective tax rate, compared with a current rate of about 15%, Oppenheimer analysts said in a research note on Tuesday. The analysts are expecting the measure to pass the State Assembly and become effective on July 1.

The higher taxes are likely to accelerate both companies' consolidation based on their ability to spend on marketing, use promotions tactically and enhance their products, the analysts said. They're maintaining an outperform rating on DraftKings stock despite the potential share pullbacks.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

May 28, 2024 08:00 ET (12:00 GMT)

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