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FanDuel-owner Flutter has urged US states not to impose a punitive rate of tax on gambling companies to avoid pushing punters towards cheaper non-licensed operators which illegally don’t pay taxes.
Chief executive Peter Jackson, who estimates the US sports and online casino market will reach $63bn by 2030, said bigger players such as Flutter were in a better position to pay higher gambling taxes than smaller rivals, who may have to push up prices in response.
“If you push taxes too high, then people . . . will use illegal operators and tax revenues [will] go down,” Jackson told the Financial Times. Black market operators do not adhere to local state requirements, but can still be accessed by Americans, and are often cheaper than their legal counterparts as they avoid paying taxes.
Jackson’s comments come as a number of US states have moved to raise taxes on gambling revenues following a major rise in legal sports betting across the country in the past six years. Illinois senators this year passed a progressive tax rate of up to 40 per cent, from the previous rate of 15 per cent, while Ohio also doubled its sports betting tax rate to 20 per cent last year.
Some New Jersey legislators have also proposed raising tax rates on online gaming revenues to 30 per cent, from a current 13 per cent for online sports betting and 15 per cent for online casino gaming.
Legal sports betting has boomed in the US since 2018, when the Supreme Court struck down a federal law that banned such wagering across most of the country. Decisions on legality are made on a state-by-state basis, but sports betting is now permitted in 38 states as well as Washington DC, according to the American Gaming Association, while online casino gambling is legal in seven of them.
Flutter paid £3.2bn in tax globally in 2023, with the US accounting for a third of that sum.
“If the [US] states are genuinely trying to maximise their tax revenues, they should be very thoughtful about pushing the tax rates up,” Jackson said, adding that the best rate would be 18 per cent for the industry. He cited the Laffer curve, which illustrates the theoretical relationship between tax rates and the amount of tax revenue a government collects.
Jackson said that in New York, where “taxes are very high and we offer customers [fewer] free bets,” some FanDuel customers opted instead to place bets in neighbouring New Jersey because “they get more generosity from us.” New York’s 51 per cent sports betting tax rate is one of the highest in the US.
However Jackson also argued that moderately higher taxes “serve the larger players better [than smaller ones], as we’ve got more levers we can pull to help mitigate them”. He said the company stood to win customers from small operators, if they were forced to raise their prices and reduce marketing spend to navigate higher duties.
Jackson’s tax warning comes after he told investors last month that Flutter, which shifted its primary listing from London to New York in May, was expecting to more than double its core profit by 2027 from this year’s projected $2.5bn to “over $5bn,” with the US accounting for nearly half of that sum.
Jackson put the upgrade down to a higher frequency of betting than previously estimated, as well as better customer retention. By 2030, Flutter expects 80 per cent of the population to have access to legal online sports betting and 25 per cent to online casino games.
However, analysts said potential threats to US growth could include political pushback and regulatory uncertainty, including possible restrictions on advertising and limits to maximum stakes, as sports betting and online casinos become more popular.
Outside the US, Jackson did not rule out acquiring Italy’s main national lottery licence, a tender for which is expected to be launched as early as this month. “We like markets where you can innovate around the lottery and then use that as a cross-selling platform” he said.