What will happen to bettors if states hike their sports wagering taxes?

In Illinois, the Sports Betting Alliance (SBA) consists of BetMGM, DraftKings, Fanatics, and FanDuel. These major operators are concerned with a proposed tax hike in the state. If the cost of doing business goes up, that could lead to several negative changes for bettors. That includes worse odds, fewer promotional bets, and even a chance of pulling their stakes out of the market entirely. Illinois sports betting is at a crossroads right now. The major operators in the state have warned bookmakers that they may need to reevaluate their level of investment. Not ideal for bettors.

How will bettors be negatively affected by a hike in sports wagering taxes in Illinois?

The Sports Betting Alliance calls the possible changes in Illinois to be simple economics. If the cost to do business goes up for operators, those added expenses need to be offset somewhere. That’s where bettors could see the negative effects when they got to play a wager. SBA president Jeremy Kudon had this to say.

“This tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers – not to mention provide a massive leg up to dangerous, unregulated and illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations,” - Jeremy Kudon

Do hold percentages directly correlate to tax rates?

However, not everyone is convinced by what these operators are threatening to do. Deutsche Bank analyst Carlo Santarelli spoke about this on Monday in a note to clients. Mr. Santarelli claims there is no discernable difference in hold percentages related to the tax rate. He used New York as an example. The Empire State had a 9% hold over the last 12 months. It was managed at a 51% tax rate. In Michigan, they had the same 9% hold, but at a tax rate of just 5%. SBA spokesperson Nathan Click had this to say about a potential tax hike for sports betting.

“Raising sports betting tax rates will invariably force these businesses to offer less competitive products,” said Nathan Click. “Already, companies have testified that they are making decisions to invest far less in promotions and partnerships in high tax places like New York, and worse odds for consumers is the next inevitable step.”

Additionally, operators will offer fewer promotional bets if sports betting taxes increase in Illinois. DraftKings CEO Jason Robins noted that the major operator has already reduced promotional bets in New York due to their increased tax rate. The same could happen to Illinois if the tax rate increases.