Less than an hour after Flutter’s second-quarter earnings call ended Aug. 13, DraftKings announced that after hearing customer feedback, it will back off plans to impose a winners surcharge. The company announced the idea in early August, only to get swift and negative feedback.
Wall Street Aug. 14 reacted positively, sending DraftKings’ shares up as high as $33.50 per share before they settled at $32.06, up nearly 2 percent. While Rush Street Interactive and Penn Entertainment had previously said they would not follow DraftKings’ lead, the company was clearly waiting to see how FanDuel would react.
“We have no plans to introduce a surcharge to winners,” CEO Peter Jackson said during the Q&A portion of the call. He then declined to entertain the issue further when others asked.
Jefferies’ David Katz wrote in a note that “Over time, our view had evolved to consider the notion that the initiative was intended to spark debate and awareness rather than actually recoup margins.” Truist has previously addressed “ tinkering with OSB pricing” and that analysts there “believe DKNG has less room to do so than FanDuel.”
But those in the industry were less forgiving. An argument can be made that DraftKings was the leader in accepting or proposing high tax rates, after it offered to pay the state of New Hampshire 51 percent of revenue for the right to have a monopoly in 2019.
“When mobile sports betting was first legalized in New York, it was DraftKings – alongside FanDuel – who led the way in championing the legislation that included a 51% tax on winning bets,” Fantasy Advocates for New York Sports wrote in a statement Wednesday.. “They simply had no excuse to then use these tax rates as a way to justify what could have been a $32 million cash grab for their players’ pockets.”
