Some U.S. lawmakers have been boiling a certain frog these past few years, ratcheting up the cost that online sportsbook operators must pay for the privilege of taking bets.
Maryland, Louisiana, and Ohio are among those that have recently increased the tax burden for mobile bookmakers. So too has Illinois, in back-to-back years and now in a sharp enough fashion that it looks like the biggest online sportsbooks are preparing to pass on the cost to bettors in a very tangible way.
So the frog may have had enough, and it could be about to pull some others into the pot. U.S. sports bettors, at least those in Illinois using the two biggest operators, look like they are about to share the burden of higher sports betting taxes in a way that may be hard to miss.
Key Points
- While the two major sportsbook operators have been content to stomach various tax increases in recent years, it looks like they are preparing to pass those added costs on to bettors in a much more noticeable way.
- Illinois appears to be the catalyst for this, as lawmakers there recently approved a per-bet tax for online sportsbook operators after increasing the state’s tax rate on sports betting revenue just last year.
- FanDuel-parent Flutter then announced on Tuesday that it will start charging a 50-cent “transaction fee” on every bet placed in Illinois, and DraftKings warned it plans to take action of its own.
In 2024, Illinois legislators passed a tax hike on revenue, increasing the levy to as much as 40% of revenue for online sportsbook operators. In 2025, those same lawmakers have approved a per-bet tax for online sportsbooks, which will force them to pay 25 cents per wager for the first 20 million bets in a year, and then 50 cents thereafter.
The companies that will be most affected by the Illinois sports betting tax changes are the two biggest online sports betting operators in the U.S., DraftKings and FanDuel. And, on Tuesday, FanDuel's parent company said enough was enough.
Flutter Entertainment announced in a press release that starting Sept. 1, the mobile bookmaker will charge a 50-cent “transaction fee” on every online bet placed with FanDuel in Illinois. This, Flutter said, was in direct response to the “significant increase” in costs created by the new per-bet tax.
“Should the state reverse its decision at any point in the future, FanDuel will immediately remove the $0.50 transaction fee,” the company added.
We're taxed as hell and we're not going to take it anymore
How exactly the fee will be charged or disclosed to bettors wasn’t explained in the press release (the Illinois Gaming Board is also reviewing the measure).
However, it’s going to be bettors that in some way help bear the cost, as Flutter noted that “[f]ollowing the 2024 increase, extensive efforts were made by FanDuel to absorb the cost fully without impacting customers.”
Put differently, FanDuel is claiming it was willing to swallow last year's tax hike as it has digested them in other states. Now, though, the new per-bet tax is a cost too far for FanDuel and bettors will have to shoulder some of the load.
It’s also worth noting that following the 2024 tax hike in Illinois, DraftKings rolled out a plan for a “gaming tax surcharge” in higher-tax states, something that bettors would see on their slips when placing wagers. While FanDuel held off from doing the same and DraftKings ultimately scrapped the surcharge idea, the added fee was designed, in part, to try to mobilize bettors as an opposing force to tax hikes.
A "transaction fee" like FanDuel's could get noticed by bettors in the same way that DraftKings' aborted surcharge was intended.
"I do think that this is something that may make some states reconsider because now they may be hearing more from their citizens that they don't like it,” DraftKings CEO Jason Robins said.
Something similar could be coming from DraftKings soon enough.
A spokesperson for the Boston-based operator told Covers on Tuesday that “[i]n response to the recent and prior mobile sports wagering tax increases in Illinois, DraftKings anticipates taking action and expects to share more information soon.”
Investment bank Jefferies says that it's "likely" DraftKings copies what FanDuel is doing in Illinois, which is impose a 50-cent "transaction fee" on all bets placed in the state in response to the recently approved per-bet tax there: pic.twitter.com/BSPE41mEUR
— Geoff Zochodne (@GeoffZochodne) June 10, 2025
An analyst from investment bank Jefferies also wrote in a note to clients on Tuesday that DraftKings is probably going to follow FanDuel in imposing some kind of transaction fee.
“In our view, [Flutter’s] announcement suggests [DraftKings] is likely to follow suit given its history of employing a surcharge on the tax increase in 2024,” Jefferies analyst David Katz said. “We estimate that without mitigation, the tax would amount to a ~$70M EBITDA headwind for DKNG, which the company would seek to mitigate.”
So if DraftKings follows suit in Illinois, it's worth wondering whether other state lawmakers will follow suit with a per-bet tax or more tax increases in general, and whether that will force the Big Two to consider another consumer-facing response.
Still, the per-bet tax in Illinois is putting the state in rarified air, as it will mean DraftKings and FanDuel could be subject to taxation levels greater than that of even New York’s 51% rate for mobile bookmakers. There is, then, a good chance something like a per-bet transaction fee is never applied to bettors in other states, because the tax burden there is never as high as Illinois.
What happens in Illinois ...
That said, DraftKings’ surcharge was going to be aimed at bettors in multiple states and not just Illinois, which was just the catalyst.
So, depending on how things work out in the Land of Lincoln and what lawmakers do elsewhere, is it really all that crazy an idea that FanDuel's per-bet fee could be applied elsewhere at some point?
In the meantime, state lawmakers don’t seem to have much sympathy for what’s going on with legal sports betting more broadly.
Offshore sportsbooks are still present, but the rise of prediction markets like Kalshi means there is (at least for now) a legalized form of de facto sports wagering in all 50 states. Those sports event contracts are competition for state-regulated sportsbooks. Meanwhile, the appetite for legalizing online casino gambling, which could offset sports betting tax hikes, remains weak.
There's also the possibility that some sports bettors aren't charged an added fee or subjected to worse odds because of higher taxes, but instead nudged toward wagering differently. That could be via longer-shot parlays or even prediction markets, one investment bank analyst suggested.
“We think … companies will look to alternative options to capture wallets outside the gaming tax structure or induce players to wager more, push longer leg parlays, worse pricing, or surcharges,” Citizens analyst Jordan Bender wrote in a note to clients on June 5. “We would also expect more discrete ways to avoid taxes through incremental product offerings like predictions, peer-to-peer (DraftKings=Pick6; FanDuel=FanDuel Picks), and iLottery.”
In short, U.S. sports bettors could start to notice more changes to their daily wagering experience driven by higher taxes for online sportsbook operators. What exactly that will look like in any given state is to be determined, but Illinois could be a tipping point.
I mean, if I'm DraftKings, I have to be at least a little annoyed that FanDuel wouldn't go along with my "gaming tax surcharge" idea last year (see below) and then beat me to the punch on a new Illinois betting fee this year. pic.twitter.com/j7UX2hhvRS
— Geoff Zochodne (@GeoffZochodne) June 10, 2025
It's also possible none of the above comes to pass and sportsbook operators learn to live with less (stop laughing) or that state lawmakers reverse themselves (I said stop laughing!).
Flutter CEO Peter Jackson chimed in on Tuesday that there is an “optimal level” for gambling-related taxes, which allows operators to provide an ideal experience for customers and for states to “maximize” their tax revenue over time.
What Jackson didn’t say outright, but that you could infer from his statement, was that the Illinois tax regime was not their vision of what’s optimal.
“We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers while also punishing those operators who have invested the most to grow the online regulated market in the state,” Jackson said in the release. “We also believe the introduction of the Illinois Transaction Fee will likely motivate some Illinois-based customers to bet with unregulated operators. These operators do not contribute tax revenue to the state, will not collect the newly announced transaction fee and do not offer the same levels of customer protection that regulated operators provide."
