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SportsTranscript
00:00All right. So more creativity coming from another state. Very hard to change those taxes, right? To get them from 15 to 20 and 20 to 25. So instead of doing that, let's try a different way, says the state of Illinois. Let's charge a quarter on every bet placed. And we're going to even charge a little bit more if you guys are even making more money. That's a smart way to go about it, Pat.
00:22Yeah. So I think to your point, I mean, we always talk about when I come on here, when we're talking about different legislation across the country, you know, anything can happen. Who knows what can get added to things, taken out of things, what's going to pass, what's not going to pass. Even if something looks like a slam dunk, it might not pass.
00:38Well, of course, everything for states, every state has to pass a budget. And Illinois was winding down their budget process last week. And in basically the 11th hour, some Democrats, they control the legislator there in Illinois, said, hey, let's go ahead and add a per bet tax to sports betting.
00:59And it was shuffled in and included in the balanced $55 billion budget. And as part of the $800 million tax increases that they've added to the state in that process. And I don't see why Governor J.B. Pritzker won't go ahead and sign it.
01:17He, of course, signed a budget last year that changed the sports betting tax from 15% to a tiered system between 20 and 40%. And what's kind of crazy about that is it went into effect last July.
01:30So we don't even know the full effect of that tax increase. And here we are adding more. And to note that is DraftKings and FanDuel both made it into that 40% tool or tier in January.
01:44So they've been paying that 40% tax now for a couple months, and we're not even done in that full fiscal year of that new tax.
01:50So now we've got this new tax that's been added and will go into effect in July. That adds, to your point, $0.25 per bet on the first 20 million bets.
01:59And then that jumps up to $0.50 for every bet after that $20 million bet. Now you can probably guess who the sports books are that have generated more than 20 million bets in a year.
02:11FanDuel and DraftKings, you know, there were, let's see, where are my numbers?
02:15370 million bets in Illinois last year. Those were the only two that took more than 20 million, each taking 150 million each.
02:23So that's going to be a huge amount to them added on. You know, last year, Illinois sports books contributed $276 million in taxes.
02:33And that's, again, before that full transition. That was the calendar year.
02:37So before the full transition to that tiered tax system, if you just added these per bet taxes on that,
02:42that's an extra $159 million to that. And FanDuel would have paid $74 million extra and DraftKings $67.9 million extra.
02:51So this is a huge amount for those two sports books operators in particular.
02:57And you have to wonder who's kind of behind it. You know, I've heard some things I'm not comfortable telling them yet.
03:01But it's just a really interesting tax hike there. And yeah, you know, we have seen lots of states consider tax increases to help fund these budget shortfalls.
03:12And of course, sports betting is kind of an easy target, because that's kind of how a lot of them passed in the first place was, hey, let's use this, bring it into the regulated market and make taxes for our state.
03:23And so now you've got a lot. Of course, Governor Westmore in Maryland just signed a 5% increase during his budget process.
03:30So that goes from 15% to 20%. Ohio, of course, we had Mike DeWine two years ago, increased from 10% to 20%.
03:40This year, he wanted to go from 20% to 40%. And lawmakers said no.
03:44But to again, to your, you know, forecasting, or we went from, we have a lawmaker introducing a 2% handle tax on top of that 20% revenue tax.
03:57So yeah, we've got lawmakers getting creative and trying to find new ways to get, you know, more taxes out of this industry.
04:05And we'll see what happens. The Sports Betting Alliance, if you want to go to LSR, you know, we did just get our story up because this happened on Saturday.
04:14So there's a lengthy Sports Betting Alliance statement that include, you know, they represent BetMGM, FanDuel, DraftKings, and Fanatics.
04:23Lengthy, go ahead and read it at LSR. But it does basically just say this is preposterous. This is unfair to us.
04:31Why did you do this rather than, you know, look at legalizing online casino, which would have increased lots of taxes, but also helped us, you know, build an industry and help the economy here in Illinois.
04:42So it is really interesting. And then you kind of look at, okay, well, this is a huge amount of extra taxes that FanDuel and DraftKings are going to pay.
04:49Maybe they're going to shift resources a little bit as we see Missouri coming online later this year and see, you know, what kind of, you know, what kind of effects that might have in the long run.
04:59But, yeah, this is crazy in that, you know, who knows what other states are going to follow this, you know, kind of like everybody's trying to look at New York with 51% tax rate.
05:11You know, everybody might say, hey, if Illinois is doing this, let's do it.
05:15Or maybe the Ohio Handle Tax passes, you know, the only other state with a handle tax is Tennessee.
05:21Maybe other states are saying, hey, let's do that.
05:23So certainly interesting tax developments in the sports betting industry here late in the session.