The CEO of Flutter Entertainment, Peter Jackson, has voiced worries about the high tax rates that are being proposed for gambling enterprises in the United States. He issues a warning, saying that these actions can push players to less expensive, unlicensed operators that don’t pay state taxes.
According to Jackson, the U.S. sports and online casino market could soar to $63 billion by 2030. He emphasized that larger companies like Flutter, which owns the popular FanDuel brand, are in a better position to absorb higher taxes. However, smaller competitors may struggle, resulting in higher prices for consumers. Jackson stated, “If you push taxes too high, then people will use illegal operators and tax revenues [will] go down.” Unlike licensed businesses, these black market operators bypass state regulations, offering lower prices that attract bettors.
Jackson’s warning comes as several states increase taxes on gambling revenues in response to a surge in legal sports betting. For instance, Illinois recently approved a progressive tax rate that could reach 40%, up from 15%. Additionally, Ohio doubled its sports betting tax rate to 20% last year. In New Jersey, some legislators propose raising online gaming tax rates to 30%, compared to the current rates of 13% for online sports betting and 15% for online casino gaming.
The Risk of Higher Taxes
The legal landscape for sports betting transformed in 2018 when the Supreme Court overturned a federal ban, allowing individual states to establish their regulations. As it stands, 38 states plus Washington D.C. permit sports betting, while online casino gaming is legal in only seven jurisdictions. Flutter’s global tax payments amounted to £3.2 billion ($4.1 billion) in 2023, with the U.S. contributing a third of that figure.
Jackson noted that for U.S. states aiming to maximize tax revenue, it’s crucial to consider the implications of raising tax rates. He suggested that a balanced tax rate of around 18% would be more beneficial for the industry. Referring to the Laffer curve, he explained the relationship between tax rates and potential revenue.
In New York, where taxes on sports betting are particularly steep at 51%, some customers are choosing to place bets in neighboring New Jersey for more attractive offers. Jackson observed that high taxes might benefit larger operators like Flutter, which can implement strategies to offset the impact, potentially attracting customers from smaller rivals.
Looking ahead, Flutter anticipates doubling its core profit by 2027, projecting an increase from $2.5 billion to over $5 billion, with nearly half expected from the U.S. market. Jackson attributes this growth to increased betting frequency and improved customer retention. By 2030, Flutter aims for 80% of the population to have access to legal online sports betting and 25% for online casino games.
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