DraftKings (Uninhabited) Island
There is a big unanswered question when it comes to the DraftKings' surcharge: Is DraftKings acting alone or will some of its competitors follow suit?
The Bulletin Board
NEWS: It’s looking increasingly like DraftKings will be the only operator to add a surcharge on winning bets.
BEYOND the HEADLINE: Will states kibosh the surcharge?
WEEKEND CATCHUP: iLottery supplier change in Michigan; Lottery fraud scheme uncovered in TX; Quote of the Week.
NEWS: TransUnion survey compares financial health of bettors and non-bettors.
AROUND THE WATERCOOLER: The problem gambling panel at Bet Bash shows a lack of faith in operators.
STRAY THOUGHTS: You’re here anyway. You might as well use the time.
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Is Anyone Going to Join DraftKings and Add a Surcharge?
It’s looking more and more like DraftKings pulled a Jerry Maguire with its announcement that, beginning in January 2025, it would institute a surcharge on winning bets in high-tax states.
The big difference is Jerry got one person (and Flipper the goldfish) to come along; DraftKings appears to be flying solo.
Rush Street Interactive not only poo-pooed the idea of adding a surcharge but also sent out a press release in which Richard Schwartz, CEO of RSI, said, “As we put our customers first, it was an easy decision for us.”
Speaking on the surcharge, Penn’s CEO Jay Snowden said the company would be an “observer” during last week’s earnings call.
“We have a lot going on in front of us right now over the coming quarters, so I would say when you’re talking about a potential tax surcharge in early ’25, that’s not even on our radar. I hesitate to ever say never,” Snowden said. “We’re going to stay very close to it, we’ll observe, we’ll see what the reaction is, assuming that it does launch in early ’25.”
All eyes will be on FanDuel this week, which has an earnings call tomorrow. I will be shocked if FanDuel follows in DraftKings footsteps. The smart money is on a Penn-like statement.
Beyond the Headline: States Could Nix Surcharges
Speaking of DraftKings’ surcharge, there is a serious discussion afoot about its legality and whether states will allow DraftKings to institute the policy.
Per the Times-Union, the surcharge would need to be approved by the New York State Gaming Commission — a spokesperson said the matter was under review.
Lobbyist Steve Brubaker has issued similar warnings for Illinois, noting, “This DK surcharge thing reminds me of when Dave and Buster’s just up and announced they were going to offer betting on ski ball and other games in their arcades.”
Brubaker quoted a pertinent section of the Illinois sports betting law: “(c) The Board shall levy and collect all fees, surcharges, civil penalties, and monthly taxes on adjusted gross sports wagering receipts imposed by this Act and deposit all moneys into the Sports Wagering Fund, except as otherwise provided under this Act.”
Brubaker also noted that during the pandemic, “the IGB gave the Administrator extraordinary authority over a variety of issues. One being emergency rule making. That authority has been renewed and expanded multiple times. He could just prohibit surcharges.”
And then there is Massachusetts, which isn’t on the surcharge list yet. Massachusetts is DraftKings home state and the home of the most thorough and no-nonsense gaming commission. AS Bill Speros said of the surcharge (as reported in the MutStack Newsletter):
“In my opinion, it will be considered a change to the House Rules. And those have to be approved by the MGC. Commissioners will undoubtedly ask why others are not doing it and what does DraftKings do for losing bets. They are free to set any odds they want, but this is changing the payout after the price was set on a ticket.”
It would be something if DraftKings weren’t allowed to implement the policy, leaving it with all the bad PR and none of the financial benefits. However, it would provide an easy way for DraftKings to rescind the policy,
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Weekend Catchup: iLottery Change in Michigan; Lottery Fraud Scheme; Quote of the Week
RFP for iLottery in Michigan: The Michigan iLottery appears ready to move on from Pollard when its contract expires in July 2026. Per the Financial Times, “The Lottery has recommended starting in July 2026, the contract for the supply of iLottery and related services will be provided by a supplier other than Pollard Banknote.” h/t to Dan Kustelski for spotting this one. And as Jessica Welman tweeted, “Interesting that the supplier is announcing it and not the lotto as well, right?”
Million-dollar lottery fraud scheme uncovered: Two Texas teens have been accused of pulling off a lottery fraud scheme at a Walmart where they were employed, which netted them more than $1 million. The duo allegedly “generated false lottery winnings ranging from $300 to $500 per transaction,” Lottery Geeks notes, adding, “Walmart has acknowledged that it wants to take on a more active role in lottery sales; it remains to be seen if this one incident will dampen the company’s enthusiasm.”
Quote of the Week (from 5+ years ago): “One thing we did do is we ended forever the European understanding that we have this ‘safe-haven’ for mistakes they make,” former New Jersey Division of Gaming Enforcement chief David Rebuck said during the 2018 G2E conference. “In the US, our laws are different. We offer protections that are stronger for customers and consumers. There is no safe haven for companies that make mistakes, whether negligence or gross negligence — and there [are] consequences to that, so you’d better be better at what you’re doing, re-look at your internal controls, reduce your risk.”
Survey Compares Financial Health of Bettors and Non-Bettors
There are several interesting data points in a recent online survey of 3,000 adults (April 29 – May 8, 2024) conducted by TransUnion that examined the financial health and spending habits of gamblers and non-gamblers.
As TransUnion notes, the US is currently experiencing increased regulatory scrutiny:
“The question is — is there a cause for concern from regulators and if so, what are the best signals and data points to utilize to proactively identify player risk? As part of this report, we delved deeper into consumers spending higher sums every month to identify when operators and regulators should be concerned by what could be perceived as unsustainable levels of spending.”
One interesting data point, per TransUnion, is that bettors have higher incomes and better credit scores and were more likely “to have experienced a moderate or large increase in income in the past three months” than non-bettors.
However, they also have more problems meeting their financial obligations (see the chart below).
Unsurprisingly, 57% of the non-bettor cohort said they were cutting discretionary spending, compared to 46% of retail and 47% of online bettors. Further, “bettors were twice as likely as non-bettors to agree or strongly agree with the statement their income is keeping up with the rate of inflation.”
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Around the Watercooler
Social media conversations, rumors, and gossip.
Rufus Peabody did a great job posting the highlights from a responsible gambling panel at Bet Bash. A couple of tweets, in particular, grabbed my attention.
The limiting bettors argument that is taking place in Massachusetts has an intriguing responsible gambling subthread:
A subthread to that subthread is operator data transparency and who should have access to it:
There also seems to be a right message, wrong messenger problem:
Stray Thoughts
“Never give up on something just because of the time it will take to accomplish it. The time will pass anyway.” ~ Earl Nightingale
This quote is along the same lines as something I say to my kids and the kids at our martial arts school. You’re at school from 8 to 2 no matter what, so you might as well use that time to the best of your ability. The martial arts class is one hour long; how much you get out of that hour is up to you.