Investing.com -- Shares of DraftKings (NASDAQ:DKNG) fell 5%, while Flutter saw a 3.3% decline following the announcement of new legislation in Illinois that introduces additional fees for online sportsbook operators. The market reacted negatively to the news that came as a surprise over the weekend, with Illinois passing its FY26 Budget, which incorporates an incremental fee structure targeting high-volume operators.
BofA Securities analyst Shaun C. Kelley detailed the implications of the new legislation, explaining that the fee would be $0.25 for each wager up to 20 million wagers and $0.50 for each additional wager beyond that threshold. Given that DraftKings and FanDuel are the only two operators exceeding 20 million wagers annually in Illinois, Kelley estimates that this could significantly increase their effective tax rate to over 50% from the current rate of approximately 35%. This unexpected tax hike follows a previous increase from 15% to roughly 35% for these operators last year.
Kelley further noted the potential financial impact on DraftKings, projecting an approximate $70 million annualized EBITDA impact by 2025 and $80 million in 2026, which would constitute around 6% of the company’s EBITDA for that year, before any mitigation strategies are considered. He also mentioned that DraftKings might look into various ways to lessen the blow, such as reducing promotions or passing some or all of the fee onto customers. However, such measures could potentially disadvantage them compared to smaller operators in the market.
Citizens analyst Jordan Bender echoed the sentiment, stating, "Weekend surprise in Illinois is another bad headline for the industry." Bender pointed out that the tax seems specifically designed to impact DraftKings and FanDuel more than mid-scale companies due to their market share and the volume of wagers they handle. He estimates that DraftKings could see a gross impact to 2026E EBITDA of $79 million, or 5.4% of EBITDA, with FanDuel potentially experiencing an $86 million impact, or 2.0% of EBITDA.
The new fee structure in Illinois has raised concerns among investors about the increased financial burden on major online sportsbook operators, leading to the observed stock price declines for DraftKings and Flutter.