DraftKings to implement surcharge on player net winnings in several states

Confirmed by company CEO Jason Robins, DraftKings is preparing to introduce a "fairly nominal" surcharge on players’ net winnings in certain states across the US.

DraftKings surcharge necessary to fend off illegal market

The chief executive has said that states that currently operate with a betting tax of above 20% will be the ones impacted, which means players in Illinois, Pennsylvania, NewYork, and Vermont will face an extra charge on their net winnings.

Needless to say, the announcement was met with mixed feelings. Robinson explained that the company would benefit from the surcharge by allowing it to "make a reasonable margin" and more importantly "compete with the illegal market."

"Obviously, some people might just react negatively to the idea of being charged at all, but it's really fairly nominal and it makes a huge difference in our ability to make a reasonable margin," DraftKings’ boss explained.

Much of this is because of the illegal gambling market, Robinson doubled down. For the company to continue offering competitive odds and invest in the customer experience, it needs to reconsider its business model in certain states – specifically those that charge a tax of above 20%.

He called the decision "an important move" that consumers would ultimately understand.

Announced as part of the company’s Q2 results, Robinsons said that the reality is such that revenue-based taxes are usually passed along to the consumer, and although the gambling industry has mostly tried to steer clear of this, places such as New York – which charge 51% on sports bets, and Pennsylvania, 36%, make it necessary to rethink the model.

DraftKings to take its time before implementing a surcharge

However, DraftKings is still absorbing much of the tax and not really "passing" the revenue-based tax onto consumers. One thing that will calm jangled nerves is that DraftKings intends to make sure that the surcharge is clearly visible on a player’s betting slip and visible once a bet is settled.

DraftKings is confident that this is the right move. Still, the company will not hurry up with its implementation – perhaps hoping for changes in New York’s legislative makeup regarding the tax rate, and sounding out how its proposal lands with consumers. The company plans to implement the surcharge in 2026, but it is already under heavy criticism from investors, observers, and consumers.

Despite the brickbats thrown at DraftKings, if the company's surcharge leads to better odds for all, the company may placate the sports fandom. This remains to be seen.

Image credit: DraftKings