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What will be the customer reaction to the tax surcharge in high-tax states by January 1, 2025?
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Resolution / Starting Odds
Positive • 25%
Neutral • 25%
Negative but less than 10% customer loss • 25%
Negative with 10% or more customer loss • 25%
Customer surveys, social media sentiment analysis, and DraftKings' customer retention data
Story
DraftKings to Implement Tax Surcharge on Winning Bets in High-Tax States Starting January 2025
Aug 2, 2024, 01:08 PM
DraftKings has announced the introduction of a 'gaming tax surcharge' on winning bets in states with high tax rates, starting January 1, 2025. This surcharge will be applied in Illinois, New York, Pennsylvania, and Vermont, where tax rates exceed 20%. The surcharge aims to lower DraftKings' effective tax rate to 20% in these states and is expected to range between 3% and 5% of net winnings, potentially creating EBITDA upside. In an example provided, a $10 winning bet in Illinois would return $19.68 instead of $20. DraftKings CEO Jason Robins described the surcharge as 'nominal' and 'customer-friendly,' asserting that it will help the company maintain competitive margins and continue marketing efforts. The surcharge will be identified on bet slips and treated as a separate transaction when paying out winnings. The announcement, made during the company's earnings report, has led to a 9% drop in DraftKings' stock price since its disclosure.
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Increase in tax rates • 33%
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