DraftKings and FanDuel parent hit by Illinois sports-tax legislation

By Steve Goldstein

DraftKings' stock is suffering its biggest one-day drop in 18 months, and is heading for a five-month closing low

Shares of DraftKings and FanDuel owner Flutter Entertainment traded lower on Tuesday after the Illinois Senate passed a bill that includes a sports-betting tax hike.

According to reports, the legislation passed by the Senate would make Illinois the second-most expensive state for wagers to do business in, subjecting the companies with the highest adjusted gross revenue to a 40% tax.

DraftKings (DKNG) shares sank 11.2% in morning trading, to put them on track for the biggest one-day selloff since they shed 27.8% on Nov. 4, 2022. The stock was also headed for the lowest close since Jan. 17, 2024.

Flutter Entertainment's U.S.-listed stock (UK:FLTR) (FLUT) dropped 6.2% toward a four-week low.

According to iGamingBusiness, the Senate bill would mean DraftKings paying a 20% tax on its $7 million on retail AGR and 40% on its digital AGR, which was $350 million.

Rush Street Interactive (RSI) and Penn Entertainment (PENN) would qualify for lower rates under the proposal. However, all of the companies would be paying more than they do now. According to analysts at Needham & Co., the sports-betting companies are currently paying a 15% tax.

While the tax proposal isn't far from previous expectations, "thinking through long-term implications, we expect fears of higher tax rates broadly to be more of a concern for investors," the analysts added.

DraftKings already has said it will look to reduce marketing expenditure if taxes are raised.

-Steve Goldstein

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05-28-24 1104ET

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