During its most recent earnings call, DraftKings announced that it is imposing a surcharge to winning bets in Pennsylvania, New York, Illinois, and Vermont starting on January 1, 2025.
DraftKings is implementing this new, and also controversial, strategy in the above four states because of tax rates that are at or above 20%.
Fortunately, New Jersey remains unaffected because its tax rate is less than that total. As such, NJ sports betting customers have nothing to worry about as of now. However, with talks of the state increasing taxes, it’s possible that DraftKings could add the Garden State to the list.
New Jersey sports bettors have nothing to worry about
Garden State bettors using DraftKings Sportsbook NJ are not subject to the surcharge. There will be nothing different about the app or winnings a New Jersey sports bettor yields.
For now, New Jersey regulators tax online sportsbooks at a 13% rate, which is considered to be middle of the pack among states with legal sports betting.
That’s why DraftKings did not include the Garden State on its list of surcharge states.
Once more for emphasis: Don’t worry, nothing is happening within the state.
Bettors who cross PA or NY borders are subject to surcharge
New Jersey, New York, and Pennsylvania share a good chunk of bettors who cross the state borders daily. Those placing bets in Pennsylvania and New York will have to pay a surcharge, which will come out of a player’s winnings.
New York and Pennsylvania have two of the highest tax rates in the country of 51% and 36%, respectively. DraftKings CEO Jason Robins said during a Q2 2024 earnings call that passing the tax onto bettors is necessary.
“Obviously, some people might just react negatively to the idea of being charged at all, but it’s really fairly nominal,” Robins said.
“And it makes a huge difference in our ability to make a reasonable margin and also, more importantly, to compete with the illegal market which pays no taxes and has the ability to invest 100% of their revenue into product and other things.”
Robins called the tax “nominal,” but either way, bettors in those states won’t be happy that money will be taken from winning bets. In a Q2 2024 investors presentation, DraftKings divulged the tax will be seen on the bet slip. Bettors are going to know exactly what will be taken out of their potential winnings before placing the wager.
Make sure bets are being placed in New Jersey to avoid the tax, if it matters to you.
New Jersey in talks about raising taxes
Sen. John McKeon, D-Essex/Passaic, proposed a tax hike last March that ultimately did not make the 2025 fiscal year budget. However, it looks like it’s going to happen sooner rather than later.
McKeon suggested that sportsbooks, along with NJ online casinos, tax rates should rise to 30%. The discussion has been tabled until the fall, but McKeon remains steadfast on a hike.
“I’m disappointed that we didn’t get it done in time to be helpful this budget cycle,” McKeon told PlayUSA in June. “But there’s no doubt with the forecast for economic times in front of us that, ultimately, we will make some changes to the online gaming tax rate in our state.”
DraftKings’ decision to impose the surcharge came on the heels of Illinois increasing its flat rate of 15% all the way to 40% for market leaders DraftKings and FanDuel. By doing this, Robins is hoping other states don’t follow suit.
“I do think 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,” Robins said.
“But certainly we will continue to advocate for taxes that allow us to compete more with the illegal market and I’m hopeful and I believe most states do see the vast majority of states around the country have tax rates of 20% or under. It’s just a handful that don’t.”
If New Jersey were to ever increase taxes, it’s possible bettors would be affected. For now, though, New Jersey bettors have nothing to worry about.
