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Illinois Tax Increase Causes DraftKings and FanDuel Stocks to Plummet by Over 140%

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Illinois Senate Approves 140% Tax Hike on Online Sports Betting, DraftKings and Flutter Entertainment Stocks Fall

In a surprising move over the weekend, the Illinois Senate approved a 140% tax hike on online sports bets, impacting companies like DraftKings (DKNG) and Flutter Entertainment (FLUT). This decision sent shockwaves through the stock market, with both DKNG and FLUT experiencing significant losses in early Tuesday trading.

According to a Tuesday analyst note from BTIG, DKNG and FLUT are expected to face tax rates of 36% and 37% on gross gaming revenue under the state’s 2025 budget. This represents a substantial increase from the current 15% tax rate. Despite this setback, BTIG believes that the companies can offset the tax hike by implementing cost controls.

Citi analysts estimated that the tax hike could cost Flutter $94 million over a full year, but potential mitigation strategies, such as reducing promotional spending, may help alleviate the financial impact.

While BTIG analysts do not foresee similar tax hikes in other states at the moment, there is growing concern about state budget pressures. Deutsche Bank analysts suggested that states like Michigan and New Jersey could follow suit if the need arises.

Oppenheimer analyst Jed Kelly noted that additional tax hikes by states could accelerate consolidation between DraftKings and FanDuel, as cost efficiencies become more crucial.

In response to the news, DKNG shares fell 11.2% to 36.24, hitting a four-month low, while FLUT dropped 6.2% to 191.49. FLUT had been forming a cup-with-handle base with a 212.37 buy point.

Investors are advised to stay informed on the evolving situation and monitor the impact of these tax hikes on the online sports betting industry.

Team@GQN.