DraftKings, FanDuel to Offset High Tax Rates with Price Hikes?

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00:00All right, so we know that FanDuel and DraftKings, especially DraftKings in particular, we know

00:08are upset with the tax rate in some of these different states, including New York, above

00:1250 percent.

00:13Some other places, 30 percent, 40 percent.

00:15But Sam, the interesting story, and I know that you guys wrote about this at Legal Sports

00:18Report, is it appears as though they're going to try and make that money up in some way.

00:25They tried once by, you know, DraftKings tried once by essentially saying that they were

00:29going to do something that they got locked back on.

00:32But do they really think, Sam, that they're going to get away with like raising their

00:36minus 110s to minus 130s with nobody noticing and things like, because there are other options

00:40for people to take to.

00:42And I also wonder if the competitors to DraftKings and FanDuel, if they choose to do this, just

00:47kind of stick it to them by saying, hey, look, same bets.

00:51You guys are charging minus 130, we're only minus 110.

00:54I don't understand how they think they're going to get away with this.

00:57Yeah, so the companies themselves have not outright came out and said anything about

01:02adjusting the prices.

01:03Now, they do have a lobbying group called the Sports Betting Alliance, which represents

01:06all the companies and has essentially threatened, hey, states, if you raise your tax rates

01:11like they did in Illinois when they were fighting the tax raise there, it's going to make

01:15prices worse for the customer.

01:16So essentially saying the companies are going to do this, companies themselves have not

01:19actually come out and said anything.

01:21Another group that has been very vocal on this issue is Wall Street's, you know, they

01:26have a lot of stake in the game.

01:28They want they don't want these companies to be losing 200 million dollars a year from

01:33just one state raising its taxes.

01:34So the firms have done a lot of research.

01:37One called Truist came out this week and said that if FanDuel and DraftKings raise their

01:43prices across the board, that's pretty interesting, not just in a single state, but

01:47across the nation.

01:48They could add about 240 million dollars in revenue, which sort of fits perfectly in that

01:54whole of revenue that they're projecting just from the Illinois tax increase next year.

01:59Pretty interesting that it's not a state by state measure.

02:02They've kind of threatened that in the past or at least talked about it.

02:05But it seems like it would be difficult just in the market, the way you market your odds

02:09to say, hey, in New York, it's minus 140, but in a state like New Jersey, it's plus

02:15110. It seems like that would be pretty difficult to do.

02:18They have never really gotten into why they might do it or why they might not do it.

02:23Now, overseas in Germany, a sort of similar thing has happened in the past where the

02:29country made a tax on a handle and operators dealt with it by passing the cost down to

02:34the customers there.

02:36The operator that now leads there actually got around it by just driving people towards

02:40more profitable bets.

02:42More profitable bets lately have been parlays and same game parlays, which these

02:46companies have repeatedly driven people to.

02:48So if I had to guess what they would do, I would just guess that they'll try to drive

02:53more people towards those more profitable bets and hold off on raising prices for now.

02:57But it is something that sort of is in the back that's being threatened and being

03:01thought about and pushed by at least some investors on Wall Street.

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