The shockwaves are still being felt across the sports betting industry following the DraftKings announcement that it will be instituting a tax surcharge on winning online sports bets in four states beginning 2025.

Pennsylvania is one of four states where DraftKings users will be charged a yet-to-be determined tax surcharge on winning online sports bets to offset the state’s 36% tax rate. The Keystone State is joined by New York, Illinois, and Vermont as the first DraftKings jurisdictions to be subjected to the charge.

It’s worth noting that it is understood that these surcharges are for sports betting only and should not impact Pennsylvania online casino play. With online casino typically considered to be a more profitable area for operators, it’s unlikely we’ll see surcharges on net winnings on US online casinos.

The new tax surcharge on sports betting will go into effect on Jan. 1, 2025.

DraftKings Announces Plan During Q2 Report

DraftKings certainly ruffled some feathers with the announcement of the tax surcharge last week. The surcharge will be implemented in “high tax online sports betting states that have multiple operators (Illinois, New York, Pennsylvania, and Vermont) to ensure an operational effective tax rate of approximately 20%,” according to the company’s Q2 earnings report press release.


New York features an online sports betting tax rate of 51%, Illinois a rate of 20% to 40% depending on the sportsbook’s adjusted gross revenues (likely a 40% rate each month), Pennsylvania a flat rate of 36%, and Vermont a rate of 31% for the operator.

During the actual Q2 earnings call on Friday, Aug. 2, DraftKings CEO Jason Robins explained the decision as a way to continue offering customers similar bonuses and promos in these highly taxed states, keep tax rates close to 20% as possible, and achieve a positive adjusted EBITDA next year.

And by the looks of things, it doesn’t seem like the sports betting giant will change its mind about the new policy.

“So, as of now, I don’t think there would be any reason that we wouldn’t implement it, but obviously we’re paying close attention to customer feedback. And if we hear anything that makes us change our mind, we’ll certainly let you know,” Robins said during the call.

How Does This Affect Pennsylvania?

While the tax surcharge for each state has yet to be announced, in the DraftKings report the company gave an example of how the tax surcharge will work. The company displayed a winning Illinois +100 odds ticket for $10, winning a total of $19.68, instead of the usual $20.

This puts the odds of that ticket at just about -103 with the new surcharge.

DraftKings pays about 40% each month in taxes in Illinois, a similar rate as Pennsylvania, so a similar tax surcharge structure could be expected for the Keystone State.

DraftKings currently has about 33% of the sports betting market in the country, roughly the same size of FanDuel’s market. FanDuel’s Q2 earnings report will be shared on Tuesday, Aug. 13, and all eyes will be on the operator to see if they plan to institute a tax surcharge as well.

Assuredly, DraftKings is hoping FanDuel will follow suit. But will they? FanDuel could theoretically capture DraftKings users who may look to leave the operator and not pay a tax surcharge elsewhere, but would the number of customers switching to FanDuel offset what they could make by instituting their own charge?

The industry is approach a crossroads and FanDuel’s Q2 report will give us a glimpse into what the future holds for U.S. bettors.