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BetMGM and Caesars Entertainment won't implement a surcharge like their competitors in Illinois, according to a financial analyst's assessment.
Published on: June 13, 2025, 4:01h.Last updated on: June 13, 2025, 4:01h.
Todd Shriber @etfgodfather Stay Informed. Finance. Sports Betting. Mergers and Acquisitions
In a twist, FanDuel and DraftKings (NASDAQ: DKNG) unveiled transaction fees of 50 cents per wager in Illinois due to the state's recent online sports betting tax hike. But will BetMGM and Caesars follow suit? Not according to analyst Barry Jonas of Truist Securities.
Illinois' Latest Tax Hike: A Potential Boost for MGM and Caesars
In a report to clients, Jonas suggests MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) can leverage the Illinois tax hike to bolster their presence in the sixth-largest U.S. state. As BetMGM and Caesars Sportsbook aren't seen rushing to adopt the same fees as FanDuel and DraftKings, critics argue there could be a prime opportunity for these two competitors to gain ground.
Under the new Illinois tax plan, operators face a 25-cent tax per sports wager on the first 20 million bets, while a 50-cent tax applies after 20 million bets are surpassed at a specific online sportsbook. This progressive tax structure mainly targets the largest players like FanDuel and DraftKings, who are likely to be the most affected under the new plan.
The Surcharge Debacle: Public Relations Nightmare or Opportunity?
On June 13, FanDuel announced its intention to introduce a 50-cent fee for every online sports wager placed in Illinois starting September 1. DraftKings followed suit on June 14, signaling similar action. The announcements sparked backlash from consumers, particularly smaller bettors, who considered the surcharges as a form of punishment for the tax increase. It's possible that smaller competitors in Illinois may capitalize on this negative publicity, trying to gain market share from the industry giants.
In the past, DraftKings attempted to implement transaction fees in Illinois, New York, Pennsylvania, and Vermont but abandoned the plan due to a lack of support from other operators. Currently, both FanDuel and DraftKings have claimed they will rescind the surcharge if the state provides more favorable tax solutions. However, the outcome is uncertain, potentially leaving the operators stranded on "Surcharge Island" with smaller competitors potentially taking advantage of a public relations faux pas.
Modest Impact on BetMGM and Caesars Earnings
Jonas had previously mentioned that the new Illinois tax structure could pinch BetMGM's Illinois earnings by $4 million, with Chicago-based Rush StreetInteractive potentially taking a $3.25 million hit. Compared to the $40 million to $45 million and $35 million to $40 million headwinds FanDuel and DraftKings could face, these estimates are minor.
Jonas believes the impact on BetMGM, Caesars Entertainment, and its digital business will be minimal due to the tax scheme's primary focus on the larger operators like FanDuel and DraftKings.
"The recently announced Illinois tax increase isn't expected to significantly impact BetMGM and Caesars' respective digital businesses, as the tax structure primarily targets the larger players," wrote Jonas.
In summary, small and medium-sized operators like BetMGM may experience less financial strain compared to their powerhouse competitors like FanDuel and DraftKings due to differences in scale and market share. However, all operators will be impacted by the increased costs, which could lead to adjustments in their operations and potentially affect consumer behavior.
- In the Midwest, regional news outlets report on the Illinois tax hike in the sports betting industry, highlighting the recent announcement by FanDuel and DraftKings about transaction fees per wager, and speculating if BetMGM and Caesars Entertainment will follow suit.
- Analyst Barry Jonas of Truist Securities suggests that MGM Resorts International and Caesars Entertainment could use the Illinois tax hike as an opportunity to bolster their presence in the Midwest, taking advantage of a potential backlash against FanDuel and DraftKings' proposed transaction fees.
- Under the new Illinois tax plan, online sports betting operators face a progressive tax structure, with a lower tax per wager on the first 20 million bets and a higher tax after that, aiming to target the largest players like FanDuel and DraftKings.
- The announcement of transaction fees by FanDuel and DraftKings has sparked a wave of criticism from consumers, perceptionally punishing smaller bettors due to the tax increase, opening up a potential avenue for smaller competitors to gain ground in Illinois.
- Despite the new Illinois tax structure posing challenges for operators, analyst Barry Jonas expects minimal impact on BetMGM, Caesars Entertainment, and its digital business, given that the tax structure primarily targets the larger players like FanDuel and DraftKings, and the potential for adjustments in their operations and consumer behavior.
