Sports betting regulators in New York were heavily opposed to DraftKings’ ‘misleading’ betting surcharge

In early August, DraftKings announced a plan to charge winning bettors a small fee in states with higher tax rates. That includes New York. On Monday, New York State Gaming Commission Chair Brian O’Dwyer noted that he “looked with great alarm” at the gaming tax surcharge that was proposed. The news to unveil this surcharge was announced on August 1. 

By August 13, DraftKings killed the idea after it received major backlash around the industry. The customer feedback on the surcharge tax was extremely poor. Not to mention that no other industry operator chose to follow DraftKings. Despite the idea being scrapped by DraftKings, Brian O’Dwyer was upset the idea was even seen the light of day. 

The plan was for winning bets in New York to be taxed an additional 20%. That would have been on top of the 51% tax rate in the Empire State. O’Dwyer called this proposal by DraftKings misleading” and he wants to protect the customers who use mobile sportsbooks in New York. During the meeting on Monday, the New York State Gaming Commission approved ESPN BET to offer online sports betting in New York. 

A 20% surcharge tax on winning bets never stood a chance in New York

New York is the largest mobile market for sports wagering in the United States. A 20% surcharge tax would have caused an uproar in the Empire State. This is a subtle warning to other mobile operators who are thinking about a surcharge tax in the future. The 51% tax rate on sports betting in New York is one of the highest in the country. Despite that, Brian O’Dwyer and the NYGC are set on ensuring New York is not taxed unfairly due to their increased local tax rate. 

Sports betting operators continue to enter the market in New York. The 51% tax rate is not a problem in the Empire State. Sportsbooks are still seeing millions in profit each year. Additionally, the tax rate in NY has helped generate hundreds of millions for education funding in the state. That includes more than $50 million since the start of the 2024 NFL season.

New York is not the only state with an increased tax rate

In Illinois, the tax rate for sports betting could be as high as 40%. Recently, they introduced a progressive tax rate that increases based on revenue. For major U.S. sportsbooks like DraftKings and FanDuel, they will see the highest tax rate of 40% without question.