FanDuel’s Illinois players are going to get a really unpleasant surprise beginning September 1 when Flutter Entertainment institutes a new $.50 transaction fee on every wager placed. The new transaction fee comes in response to a new Illinois law that institutes a $.25 transaction fee on an operator’s first 20 million bets taken and a $.50 transaction fee on any additional Wagers beyond that.
It’s a radical response to a radical tax increase and it’s unclear how consumers will react to the new fee, a fee that comes just in time for football season.
Representatives from FanDuel, which is one of two sportsbooks large enough to be impacted by the new tax, and Sports Betting Alliance (SBA) pointed out that the tax will disproportionately impact low stake bettors. “A per bet tax most penalizes small recreational bettors — many of whom are betting a single dollar or two. Under this legislation, these popular bets will get hit with a massive 25% or 50% tax,” the SBA said in comments reported on by ESPN.com.
Earlier this year a FanDuel representative told the Wall Street Journal that 90 percent of same game parlays are made at $30 or less and 60 percent are for $5 or less. A $.50 transaction fee would certainly eat into any player’s profit margin but small bettors would definitely take a bigger hit.
Peter Jackson, CEO of Flutter, FanDuel’s parent company told ESPN he believes the new tax will drive players to the black market, which would actually hurt the State of Illinois. “We also believe the introduction of the Illinois Transaction Fee will likely motivate some Illinois-based customers to bet with unregulated operators. These operators do not contribute tax revenue to the state, will not collect the newly announced transaction fee and do not offer the same levels of customer protection that regulated operators provide,” he said.
Operators and regulators across the country will definitely be watching to see how Illinois’ transaction fee impacts the sports betting market.