DraftKings surcharge stirs debate over future of U.S. sports betting

DraftKings’ recent decision to implement a surcharge on winning wagers in states with high sports betting taxes has sparked widespread concern about the future of the sports betting industry, with the issue being one of the main topics at the Bet Bash conference held last week at Circa Las Vegas.

The move, announced by DraftKings CEO Jason Robins on August 1, will see a 3.2% surcharge deducted from winning bets in Illinois starting next year. The move comes as the state recently raised its sports betting tax from 15% to 40%.

As a result, bettors in the state placing a standard bet of $11 to win $10 would now receive $9.68 if successful. This plan was met with sharp criticism from professional bettors and bookmakers at the conference.

Alan “Boston” Dvorkis, a veteran professional bettor, urged players to avoid betting under such terms, as reported by the Las Vegas Review-Journal. Dvorkis said: “Don’t do it. You’re not going to win. I don’t care how good you are. There’s no living human that can overcome that.”

The new surcharge increases the break-even point for bettors, who now need to win 53.3% of their wagers to turn a profit, up from the standard 52.4%.

Prominent sports bettor Billy Walters warned that DraftKings’ surcharge could drive bettors back to offshore sportsbooks, which operate outside of U.S. regulatory frameworks. "The offshore world’s going to be bigger than ever," Walters said, as per the report.

DraftKings has indicated that similar surcharges will be introduced in other states with tax rates exceeding 20%, including Pennsylvania, Vermont, and New York, where the tax rate is 51%.

The rising tax rates, coupled with DraftKings' planned surcharges and other restrictive practices such as limiting successful bettors, have raised alarms among industry veterans about the sustainability of the sports betting market.

Chris Andrews, sportsbook director at South Point, and Vinny Magliulo of Gaughan Gaming, emphasized the importance of maintaining a balanced relationship between bettors and bookmakers, a hallmark of Nevada’s traditional approach to bookmaking.

Magliulo stressed that mutual respect is key. “If a bettor is successful, then you tip your cap and you pay him. If customers don’t win sometimes, you’re not going to have any business,” Magliulo said, as per Review-Journal. He added that the adversarial practices seen elsewhere could harm the industry in the long run.

Walters called on state regulators to intervene, arguing that the current trajectory could lead to negative outcomes for the industry. “What worries me is the way the general customer is being treated by these sportsbook operators. But they can’t do these things if regulators don’t allow them to do it,” he said.

As DraftKings and FanDuel continue to dominate the U.S. sportsbook market, holding a combined 67% market share according to Eilers & Krejcik Gaming, the evolving dynamics of the industry will likely be closely scrutinized by both regulators and the betting public in the coming months.