DraftKings (DKNG) and FanDuel-parent Flutter Entertainment (FLOOD) face a 140% tax hike on online sports betting in a new budget approved by the Illinois Senate this weekend. DKNG and FLUT fell in early Tuesday stock action, extending their losses from late last week.
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Tax increase on online sports betting
In an analyst note released Tuesday, BTIG said it expects DKNG and FLUT to pay tax rates of 36% and 37%, respectively, on gross gaming revenues under the 2025 budget. the state. This would amount to a tax increase of 140% to 147% compared to the current tax rate of 15%.
However, BTIG added that it anticipated that online sports betting companies could offset the increased taxes by implementing cost controls.
Ahead of efforts to mitigate the tax hike, Citi analysts said it could cost Flutter $94 million if it was in effect for a full year. The mitigation could come from reduced promotional spending, the company said.
BTIG analysts said they don’t see momentum for similar tax hikes in other states. Last week, the Massachusetts state Senate rejected an amendment that would have increased the state’s sports betting tax from 20% to 51%, which would have matched New York’s tax, which would be the highest from the country.
However, pressures on the state budget appear to be increasing after a relatively benign period, so this is worth monitoring. Deutsche Bank analysts wrote that other states could follow, if the need arises, including Michigan and New Jersey, which both have relatively low tax rates on sports betting online.
Oppenheimer analyst Jed Kelly wrote in a Tuesday note that tax hikes in other states could accelerate DraftKings/FanDuel consolidation, given cost savings.
Kelly recommended buying DKNG on pullbacks related to unfavorable legislation, maintaining an outperform rating and price target of 60.
DKNG, FLOOD
DKNG slipped 11.2% to 36.24, a four-month low, on Tuesday morning. market share, after sliding 7.7% last week. FLUT fell 6.2% to 191.49, after falling 1.2% last week.
FLUT was working on a cup with handle base with a 212.37 point of purchase.
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