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00:00The hottest topic going on right now this week in the state of Illinois.
00:03And Sam, to recap for some people, the state of Illinois has decided they would like to make more money off people making sports bets.
00:11Simple and plain.
00:13The sports betting operators are responding by this saying, if you're taking money away from us, we got to have a piece of the pie, too.
00:21I have a feeling, Sam, this is just the beginning of some sort of battle in court somewhere.
00:26And by the way, whoever wins, I think other states are going to take notice.
00:31Yeah, this is just the beginning of sports betting companies really putting their foot forward and saying, there's a bunch of states out here that have had high tax rates.
00:43And usually tax rates don't go lower on businesses, especially on things that are viewed as a sin industry, like gambling is.
00:51And a bunch of states have been inching more and more towards that.
00:54Just last year, actually, Illinois used to have a 15% tax rate on sports betting companies, which was about middle of the road.
01:02Then they raised it last year from a graduated 20% to 40% with operators like FanDuel and DraftKings being hit the hardest at the top of that.
01:11So it went from 15% to 40%.
01:13Now, just about a month ago, a couple of weeks ago, Illinois decided that they wanted more money out of sports betting.
01:19I think a lot of times lawmakers see how much is being spent in the space.
01:23It's a lot of cost to do business.
01:25A lot of money gets thrown in.
01:27Whether or not they actually profit from all that is a different kind of story.
01:30We're just now seeing companies starting to profit, but they add this 50% wager tax on every bet in Illinois on top of their 40% tax already.
01:41So effectively, these companies are going from paying 15% just a year ago to now 50%.
01:46So for a long time, companies have said, oh, the cost will be passed down to the consumer.
01:53It'll be reflected in worse odds.
01:54And what we saw FanDuel do this week is announce that they're going to have a $0.50 transaction fee on every bet placed in Illinois, which will start in September, about a month after the tax takes place.
02:06So that effectively is going to hit the average bettors the most.
02:11You know, if you're betting $10 on a minus $1.30 wager, for instance, your odds are now more like minus $1.39 because you're getting a $0.50 chunk taken out of that winnings.
02:20If you're $100 better, the odds go from about $1.30, minus $1.30 to about minus $1.31.
02:26So the more you bet, the less you're impacted by this because it's only 50% or $0.50.
02:31It's a smaller percentage of your bet.
02:33But most customers are betting about $5 on parlays.
02:38It's about 60% of FanDuel's same-game parlay business is $5 bets.
02:4390% is $30.
02:44So it's really the average bettors that are going to get hit most by this.
02:48Now, FanDuel has come out and said, we're happy to take this away if you change the tax.
02:54I don't think that Illinois is going to do that anytime soon, probably not before they institute it.
02:58We saw DraftKings float a similar idea last year, about a year ago, saying they're going to have a surcharge on winning bets.
03:06Essentially the same thing as a transaction fee.
03:08They ended up not going through with that idea.
03:11They got a lot of backlash.
03:12But I think it's really interesting here that FanDuel is not really getting a lot of backlash for this.
03:16A lot of that is being targeted on Illinois for raising the tax rate.
03:20We've seen other states like Ohio, Maryland, Louisiana just continue.
03:24There's more appetite to do this sort of thing.
03:25States try to make up money now that budgets are tighter.
03:29It's that time of year where you're figuring out your budget.
03:31They don't have the surplus that they did when sports betting became really legal across the U.S.
03:36during COVID when states actually had a lot of money in their budget.
03:39So this is the first kind of big pushback by a company like FanDuel.
03:44And again, I think it's really interesting that we're not seeing a lot of targeted negative attention on them.
03:48DraftKings has already come out and said, you know, we'll probably do something like this.
03:52Every other sports book is sort of quiet on this front, probably waiting for the next domino to fall.
03:57Again, FanDuel and DraftKings are getting hit hardest by this tax because it's a graduated rate.
04:01So we're definitely going to follow what happens here.
04:05We'll see what comes September 1st, whether or not this actually goes into effect and whether or not other states try similar raises and it gets a similar reaction from companies like FanDuel.