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Regulators in several key states where DraftKings intends to implement its new customer surcharge say they are looking into the plan, as further details as to how it will be implemented remain sparse.
The company announced its plan last week to begin charging customers a surcharge on winning bets in four states with a tax rate above 20 percent and multiple operators in the market, including the major markets of New York, Illinois and Pennsylvania.
The plan, which the company says is set to be implemented in January 2025, has raised several questions in the interim that regulators will likely have to address, including whether any existing rules or policies prevent such a surcharge from being implemented.
Another outstanding question is how such a surcharge might itself be taxed, such as whether it would be included in an operator’s taxable gaming revenue similar to a losing wager, or whether it would be considered a service charge outside the scope of a gaming revenue calculation.
Regulators in all three states declined to answer those questions this week with any specificity, but all three acknowledged they were looking into it.
“The gaming commission is aware of the proposed change to DraftKings’ license application and is reviewing the matter,” said Lee Park, deputy executive director of the New York State Gaming Commission.
“We are still learning the details of the plan and have not yet had any discussions with DraftKings, so we are in no position to give a clear assessment or comment,” added Doug Harbach, a spokesman for the Pennsylvania Gaming Control Board.
Elizabeth Kaufman, director of communications for the Illinois Gaming Board, said it is “currently reviewing the proposal”, but had no further comment beyond that.
A source familiar with DraftKings’ plans told Vixio GamblingCompliance on Wednesday (August 7) that the issue was brought up with regulators before the company made its announcement last week, but added that many of the details of how the plan would be implemented, including the question of taxation, still need to be worked out.
It is not entirely clear if any states have laws or rules that would explicitly prohibit surcharges on winning bets, but there is at least some international precedent for such restrictions, including newly adopted regulations in Brazil that directly prohibit “any prize payment adjustments derived from a collection fund, commission or fee charged by the operator”.
DraftKings said the move is designed to bring the effective tax rate in higher-tax jurisdictions down to about 20 percent, and that any surcharge faced by customers would be “nominal”.
