DraftKings Inc. (NASDAQ: DKNG) experienced a significant decline in its stock price on Monday, June 2, 2025, dropping approximately 6% before noon. This downturn followed the announcement of Illinois’ passage of its Fiscal Year 2026 budget, which includes a new graduated tax structure for online sports betting operators.
Illinois’ New Tax Structure
The Illinois budget introduces a progressive tax rate ranging from 20% to 40% on sports betting revenue, replacing the previous flat 15% rate. Operators with annual adjusted gross revenue (AGR) exceeding $200 million will be taxed at the highest rate of 40%. Currently, DraftKings and FanDuel are the only two operators in Illinois handling over 20 million wagers annually, placing them in the top tax bracket.
This change represents a substantial increase from the prior tax rate and is expected to significantly impact the profitability of major operators in the state. For instance, under the new tax structure, DraftKings’ tax liability could rise from approximately $48 million to about $109 million, based on their reported revenue.
Market Reaction
The market responded swiftly to the news, with DraftKings’ stock price declining by over 6% in early trading on Monday. This drop is part of a broader trend; when similar tax increases were proposed in the past, DraftKings’ stock experienced significant declines, highlighting investor concerns over the impact of higher taxes on profitability.
Industry Implications
The new tax structure positions Illinois among the states with the highest sports betting tax rates in the country, second only to New York’s 51% rate. Industry analysts warn that such high tax rates could deter new entrants into the market and may lead existing operators to reconsider their investment strategies in the state.
In response to previous tax hikes, DraftKings had considered implementing surcharges on customers in high-tax states like Illinois. However, following public backlash and competitive pressures, the company reversed this decision, opting instead to absorb the increased costs.
