Yahoo Finance Bettors will still end up paying a price in the fallout of FanDuel, DraftKings not adding a surcharge
Bettors in high-tax states like Illinois, New York, Vermont and Pennsylvania were able to breath a sigh of relief Tuesday after the parent company of FanDuel announced it would not be adding a surcharge to winning bets.
The decision prompted DraftKings to reverse course on its previously announced plan to add a surcharge, which would have cost bettors a percentage of their winnings.
However, while it may be welcomed news for bettors in the short term, customers in those states shouldn't get too excited yet. Sportsbooks will still find ways to make their customers pay a part of those high tax bills.
One confirmed way bettors will be impacted is they'll receive fewer promotions. FanDuel said on Tuesday's earnings call it plans to mitigate 50% of the increased gaming tax in Illinois "through locally optimized promotional and marketing spend."
FanDuel specifically mentions the Illinois tax increase in its report. The company says it will counteract the increase with reduced promotional spend in the state. pic.twitter.com/6rRe4G0nWb
— RLinnehanXL (@RLinnehanXl) August 13, 2024
In other words, bettors in high-tax areas can probably expect to see fewer or less enticing sign-up bonuses, or a drop off in things like profit boosts, so-called "no sweat bets" and similar bonuses that give bettors a chance to place wagers on the book's dime.
DraftKings also hinted at similar changes before ultimately announcing the surcharge two weeks ago. “I do think that if states start to realize that above a certain level, we can’t invest in our product and customer experience in the way that we need to … it might make them think differently about it,” CEO Jason Robins told CNBC.
Though he may be overstating the company's ability to invest in its product, that could be taken to mean a number of things, including less attention paid to the front-facing product. Customers could also end up paying a monetary price in other ways too.
Rather than taking a surcharge from a bettor's earnings on the back end, sportsbooks could also increase the vig bettors pay on the front of their bets. In other words, they could offer worse odds to ensure the house gets a larger cut of each bet.
Ideally, these sportsbooks would simply eat the cost of doing business in certain states and not pass it off to their customers. Unfortunately, nothing to this point has indicated they're OK with doing that.
This article originally appeared on For The Win: Bettors will still end up paying a price in the fallout of FanDuel, DraftKings not adding a surcharge
