FanDuel users will not be subject to the added fee on winning bets that DraftKings planned to implement next year.
Just hours later, DraftKings bettors learned they will not face it either.
Peter Jackson, CEO of FanDuel parent Flutter Entertainment, confirmed that they have no intention of following DraftKings in introducing a surcharge on winning bettors in high-tax states like Illinois and New York. The announcement came shortly before Flutter reported second-quarter earnings on Tuesday, showcasing double-digit profit growth year over year, driven by FanDuel.
A few hours later, DraftKings announced it was abandoning the planned fee it announced 12 days ago.
“We always listen to our customers, and after hearing their feedback, we have decided not to move forward with the gaming tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers,” a DraftKings spokesperson said.
FanDuel pass impact on DraftKings?
FanDuel is the third US sportsbook to address whether it would follow the controversial fee, which sparked mixed reactions on Wall Street.
Some speculated it could drive the biggest and most price-sensitive bettors to FanDuel. One UK firm called the fee a “recipe for losing market share, damaging the brand, and undermining credibility.” An LSR analysis showed it could have added as much as $220 million annually to DraftKings’ bottom line.
Following Flutter’s announcement, DraftKings stock shares dropped 4.77% in after-hours trading, hitting a nine-month low of $29.95.
Flutter CEO addresses Illinois tax hike
Flutter expects a $50 million impact from Illinois’ recent tax hike on sports betting this year, the same amount as DraftKings. Due to their larger scale, both operators are expected to pay around a 40% rate on some revenue in the state, up from their previous rate of 15%.
“We believe that moderating our levels of generosity or reducing local marketing efforts is a more effective response to higher tax rates,” Jackson said on Flutter’s earnings call. “We have no plans to institute a surcharge for winners.”
Flutter shares were up 9.22% to $209 a share in after-hours trading, their highest level in three months.
Still the dominant US player
FanDuel maintained its No. 1 spot in Q2, capturing 47% of total US sports betting revenue and 51% of the online casino market, according to the earnings report.
FanDuel reported 27% growth in customers, reaching 3.47 million average monthly players in Q2. That comes after it saw a 19% jump in customers in Q1. By comparison, DraftKings reported 3.1 million average monthly unique players in Q2, which was up 47% year-over-year.
FanDuel’s US revenue grew 39% to $1.53 billion, while US adjusted EBITDA increased 51% to $260 million, driven by a 41% increase in sportsbook revenue and a 47% rise in iGaming.
Flutter raises guidance for FanDuel
Flutter reported Q2 revenue of $3.61 billion, surpassing Wall Street estimates by 7%. Adjusted earnings came in at $2.61 per share, also ahead of expectations. That led to Flutter’s decision to raise its guidance for 2024.
“The opportunity for disciplined investment in customer acquisition to embed future profits within our business remains compelling,” Jackson said. “In Q2, our superior scale and structural net revenue margin advantages allowed us to maintain projected payback periods well within our 24-month guardrails.
Flutter is now expecting a 20% increase in group revenue and a 34% rise in adjusted EBITDA at both midpoints.
The company forecasts US revenue to reach between $6.05 billion and $6.35 billion, up from its previous forecast of between $5.8 billion to $6.2 billion. US adjusted EBITDA is projected to reach $740 million.
