By Nate Wolf

Sports-betting stocks DraftKings and Flutter Entertainment were down Monday after the Illinois state legislature passed a tax on sports wagers that could cost sportsbook operators tens of millions of dollars a year.

The new levy, part of a budget package lawmakers pushed through over the weekend, will tax sportsbooks at 25 cents per bet for the first 20 million wagers and 50 cents per bet beyond that. DraftKings and FanDuel, owned by Flutter, have a roughly 75% combined market share in Illinois, according to analysts at Citizens Bank.

DraftKings stock was down 8% after the market opened. UK-based Flutter fell 2.9%.

The tax, which will take effect July 1 once the budget is signed into law by Governor J.B. Prtizker, will eat into gambling companies' earnings. It's an open question whether other state legislatures will follow suit in raising taxes on sports bets.

In a research note Sunday, the Citizens Bank team estimated DraftKings will take a $79 million hit -- or 5.4% of Ebitda -- in 2026 due to the Illinois tax before taking mitigation efforts into account. For FanDuel, the forecast impact will be $86 million, or 2% of Ebitda.

A spokesperson from DraftKings directed Barron's to the Sports Betting Alliance, an industry trade group, for comment. "Customers understand that they will be the ones to bear the cost of this new tax," the Alliance wrote in a statement Monday, adding that the law would push customers to unregulated, untaxed sportsbooks.

Barron's reached out to Flutter and FanDuel for comment.

The companies have a few levers to pull to limit the damage. They could reduce promotions, pass all or part of the levy through to customers, and incentivize higher bet sizes, analysts at BofA Securities said in a note Monday. DraftKings and FanDuel could also push into the nascent prediction-market business, essentially futures contracts that are regulated by the federal government and thus not subject to state sports-betting taxes.

Sports-betting stocks appear to be losing momentum on Wall Street and Illinois' new law won't help turn things around. DraftKings and Flutter have seen their shares more than double over the last three years, but both stocks are down so far in 2025.

Internet gambling bills are also under consideration in Louisiana, New Jersey, North Carolina, and Ohio. DraftKings and Flutter shareholders will be watching those states.

A Supreme Court ruling laid the legal groundwork for nationwide sports betting in 2018. States brought in $14.4 billion in gambling tax revenue in 2023, according to the National Association of Administrators for Disordered Gambling Services. Despite the revenue boost, funds to help people deal with problem gambling are minuscule, Barron's reported last month.

Write to Nate Wolf at nate.wolf@barrons.com

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(END) Dow Jones Newswires

June 02, 2025 11:51 ET (15:51 GMT)

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