Shares of DraftKings Inc. (NASDAQ:DKNG) are trading lower Monday after Illinois passed a new budget proposal that includes increased taxes on sports betting.
What To Know: The $55.2 billion spending portion of the budget, approved late Saturday night, is expected to raise over $1 billion in new revenue through various tax hikes, including a notable increase targeting online sportsbook operators, according to local news outlet Chicago Tribune.
Under the new budget plans, licensed sports betting operators in Illinois will now face a 25-cent tax per wager on their first 20,000 bets each year, as well as a 50-cent tax on each bet after that. This move is expected to impact margins for companies like DraftKings, which generate a substantial portion of their revenue from active betting states like Illinois.
The broader gambling sector reacted negatively to the legislation, which was pushed through by the state's Democratic majority with little time for public review. The new taxes form part of a strategy to close revenue gaps without increasing sales or income taxes, according to state leaders.
The market response reflects concerns that similar tax hikes could be proposed in other states looking to address fiscal shortfalls without directly raising income or sales taxes. For sports betting companies, higher operational taxes in key markets may weigh on profitability and potentially dampen expansion efforts.
Despite the budget's inclusion of several new tax streams, also targeting tobacco, vaping and out-of-state businesses, it’s the targeted sports betting fees that directly pressured DraftKings' stock price. Investors are now watching to see whether these fiscal strategies in Illinois set a precedent for broader regulatory pressure in the industry.
DKNG Price Action: DraftKings shares were down 7.26% at $33.28 at the time of publication Monday, according to Benzinga Pro.
Read Next:
Image via Shutterstock.
