LAS VEGAS – Taxing a winning sports bet? I had never thought about such a scenario, let alone believed that it could happen to a US sports betting provider.
However, that is exactly what Draft-Kings is proposing for January 2025 to offset the excessive tax rates in Illinois, New York, Pennsylvania and Vermont.
(According to an insider, horse racing will not be included.)
Chicago native Sam Panayotovich, a betting analyst for the New England Sports Network and Fox Sports, says there’s “no way” he would buy from a bookmaker that charges taxes on victories.
“They already charge a 10% tax on the average loss in basketball and football,” he says of the typical -110 bet, “and now they want to take money when you beat the bank? That’s bullshit. No platform or technology is worth that.”
Panayotovich knows Chicago “street guys” who are “ecstatic.”
“They have been losing customers in the state since 2020, despite all the deposit bonuses, combo boosts and refunds,” he says. “But all that is disappearing. Believe me, the (illegal) bookies are delighted.”
Jeffrey Benson, operations manager at Circa Sports, works for a company that operates in Illinois but doesn’t want to collect taxes on winning tickets. DraftKings, he says, is committed to its shareholders and its stock price.
“They don’t care about serving their customers, so that’s a pretty big risk,” Benson says. “If the other top players in the space don’t follow suit, I think DraftKings will lose a lot of market share. And I certainly won’t begrudge them.”
Betting expert and consultant Rex Beyers, who works as an oddsmaker worldwide, is convinced that these developments will give a boost to offshore business.
“Because (the offshore companies) are much more efficient for the people on both sides of the counter,” he says, “and the obvious tax advantages deserve due mention.”
GOOD LUCK
In mid-June, Michigan-born Circa owner Derek Stevens told me he was pleased with the growth of his Illinois company and his marketing deal with Marquee Sports Network.
When I asked Illinois Governor JB Pritzker if he wanted to legislate higher sports betting tax rates in the state to raise $1.1 billion in additional revenue, Stevens paused before commenting off the record.
These new, increased tax rates in the Land of Lincoln, which were implemented just two weeks before my conversation with Stevens, prompted DraftKings CEO Jason Robins to hatch his idea of a winning ticket tax.
A DK model showed a profit of $9.68 on a $10 winning bet with even odds, an additional decline of 3.2%.
Bettors need a 52.38% win rate to break even. Those who win over the long term with a 54-55% win rate are considered experts. Such bettors in these four states would be wiped out if they were to bet exclusively on DraftKings.
Someone told Panayotovich that a +100 bet after a win would essentially be -104 – “no big deal.”
“I said, ‘Yeah, OK. And -110 is now -114,'” Panayotovich says. “Good luck beating that crap in five months of football betting.”
Riot Starter
Richard Schuetz, a 63-year-old industry veteran who has managed casinos with well-known sports betting operators, most notably the Stardust, provided insights into Illinois’ Circus Maximus.
A surprise tax increase is a sign of instability in the legal system and unwelcome uncertainty for operators, he says.
“And when the judiciary views an industry as a cash machine to fulfill politicians’ desire for more government funding, alarm bells will ring,” says Schuetz. “It’s really quite simple.”
As for a book that actually taxes winners, Schuetz again pointed to the Stardust. Because it had high stakes, it was close to the betting center of the country. Nothing about it was soft.
“And to build such a reputation, we had to be very sensitive to our pricing,” he says. “Low prices and high limits made us special, as did some of the most talented risk managers in the world.”
“With this background, you don’t even think about raising prices. That would cause an uproar at the checkout.”
Regulars called the legendary brick and mortar building “Dust.” DraftKings exists largely in the ether of cyberspace.
“First of all, you are face to face with the market,” says Schuetz. “If we tried to add a ‘kick’ to the price, they would throw it at us with all their might. Our customers know the business and won’t be tricked.”
“A soft book with a lot of inexperienced bettors can probably manipulate prices without the market noticing. But it will always be just a soft book, which eliminates a lot of wiggle room.”
ANOTHER VOICE
As CEO, Schuetz recently teamed up with bettor Gadoon “Spanky” Kyrollos to create the American Bettors’ Voice (ABV), which aims to inform policymakers and operators.
According to Schuetz, the Massachusetts Gaming Commission has been a model of fair play since a Senate bill that would have increased the sports betting tax from 20 to 51 percent was rejected in the Senate in late May.
The MGC has demonstrated character, honesty and integrity by learning about and questioning business practices, he says.
New Jersey lawmakers considering raising the Garden State’s sports betting tax from 13 percent to 31 percent will hear from ABV.
Illinois is also on ABV’s radar.
“We plan to work with the betting community to ensure that decisions in the betting space are made fairly and honestly,” says Schuetz, “and our goal is to work towards sustainable betting solutions. We are also encouraged by people like you who tell the world that there is another voice out there, and that is the voice of the bettors.”
