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Flutter CEO Says States Need to Be Careful About Sports Betting Taxes

Peter Jackson, the CEO of Flutter Entertainment (NYSE: FLUT), asserts that states should be evaluated on their implementation and possible increase of online sports betting taxes, as excessively high rates might push bettors towards unregulated offshore markets. 

In a discussion with The Financial Times, Jackson stated that the optimal rate for internet sports betting across the US would be 18%. That exceeds the rates currently imposed on operators in New Jersey and certain other states, yet it remains significantly lower than what gaming firms are paying for that type of betting in Illinois, New York, and Pennsylvania. 

Jackson referenced the Laffer curve to support that argument. Named after economist Arthur Laffer, the curve shows the correlation between tax rates set by the government and the revenue collected.

"It suggests that taxes could be too low or too high to produce maximum revenue and that both a 0% income tax rate and a 100% income tax rate generate $0 in receipts,” according to Investopedia.

Based on that, Jackson is proposing a "Goldilocks" situation where neither too high nor too low would be ideal for both the states and sportsbook operators. 

Essential Period for Flutter Tax Remarks 

Flutter, headquartered in Dublin, is the parent organization of FanDuel, the largest online sportsbook operator in the United States. Jackson's remarks on taxes for sports wagering in the US emerge as several states have already raised taxes on this type of betting, with others considering similar hikes. 

Last year, Ohio increased its online sports betting tax from 10% to 20%. In July, Illinois adopted a graduated tax system where major operators like FanDuel and DraftKings (NASDAQ: DKNG) incur higher rates compared to their smaller competitors. In New Jersey, there has been an effort to raise the sports betting tax, while in Maryland, lawmakers are looking into either removing or reducing promotional deductions. 

Jackson’s remarks came only days after the Global Gaming Expo (G2E) in Las Vegas, where several industry experts indicated it's merely a question of time before certain states raise sports betting taxes. New Jersey was one of the locations most frequently cited by participants as a probable next contender for this. 

Robert Stoddard, a principal US tax expert for gaming at KPMG, mentioned at the conference that state-level sports betting taxes are expected to mirror the patterns seen with taxes on alcohol and tobacco. In other words, nations think they can increase taxes without impacting consumer behavior. 

Flutter Maintains Steady Stance on Sports Betting Tax Perspective 

When Flutter announced its second-quarter outcomes in August, Jackson condemned the graduated tax model used in Illinois, cautioning that states adopting that approach or increasing sports betting taxes universally could drive bettors to illegal sportsbooks or sweepstakes businesses. 

In an interview with The Financial Times, Jackson mentioned that increased taxes are more burdensome for smaller companies compared to larger ones, as businesses like FanDuel and DraftKings have additional means to increase expenditures and manage elevated excise taxes. 

He also mentioned that gamblers are responsive to cuts in promotional spending. Using New York as an example, Jackson mentioned that numerous FanDuel bettors travel to New Jersey because FanDuel provides more generous incentives there because of reduced taxes.