On Tuesday, DraftKings Inc. and FanDuel-owner Flutter Entertainment Plc experienced a decline in their stock prices following the passing of legislation in Illinois that would increase taxes on sports betting. The new legislation, part of the state’s budget package, would change the current flat 15% tax rate on sports gambling to a graduated format that could go as high as 40% based on the adjusted gross revenue of sports gaming companies.
DraftKings shares fell by as much as 10%, marking the largest decline since August, while Flutter’s US shares were down by 5.6%. Analyst Bernie McTernan from Needham noted that concerns about potential tax increases in the state have been on investors’ minds for months. He suggested that investors may shift their focus to how much financial impact the higher taxes may have and whether it can be offset by reducing investments in customers.
On the other hand, Rush Street Interactive Inc. saw no change in their stock prices, and shares of Penn Entertainment Inc. were down by as much as 1.6%. McTernan explained that these companies may pay a lower tax rate compared to DraftKings based on their current market share. The implications of higher tax rates on companies in the sports gambling industry may become a significant concern for investors moving forward.
The passing of this legislation is likely to have a significant impact on the sports gambling industry in Illinois, with higher taxes potentially leading to reduced profits for operators and increased costs for consumers.
In conclusion, while some stocks in the sports gambling industry experienced declines following the passing of Illinois’ new legislation, others remained unaffected or even saw slight gains. As investors continue to monitor developments closely, it will be important to keep an eye on how each company adapts to these changes and whether they can maintain profitability amidst increased tax burdens.
