Flutter CEO Says States Need to Be Careful About Sports Betting Taxes

Flutter CEO Says States Need to Be Careful About Sports Betting Taxes

According to Peter Jackson, CEO of Flutter Entertainment (NYSE: FLUT), authorities should exercise caution when imposing online sports betting taxes and may even increase them because doing so could lure bettors to unregulated offshore markets.

Jackson stated in an interview with The Financial Times that 18% would be the optimal rate for online sports betting in the United States. That is significantly less than what gaming companies pay for that type of betting in Illinois, New York, and Pennsylvania, but it is more than what operators are now charged in New Jersey and a few other states.

Jackson supported the claim with the Laffer curve. The curve, which bears the name of economist Arthur Laffer, shows how government tax rates and collected revenue are related.

"It suggests that taxes could be too low or too high to produce maximum revenue and that both a 0% income tax rate and a 100% income tax rate generate $0 in receipts,” according to Investopedia.

Jackson makes the case that a "Goldilocks" situation—one that is neither too high nor too low—would work best for states and sportsbook operators.

Important Time to Comment on Flutter Taxes

Located in Dublin FanDuel, the biggest online sportsbook operator in the United States, is owned by Flutter. Jackson made his remarks regarding US sports betting taxes at a time when some states have already raised their levies and others are considering doing the same.

Ohio hiked its online sports betting tax from 10% to 20% last year. Large operators like FanDuel and DraftKings (NASDAQ: DKNG) pay greater rates than their smaller competitors under Illinois' progressive tax scheme, which went into effect in July. Additionally, lawmakers in Maryland are considering removing or reducing promotional discounts, and there has been a push in New Jersey to increase the state's sports betting tax.

Jackson made his remarks a few days after industry watchers at the Global Gaming Expo (G2E) in Las Vegas pointed out that it's only a matter of time until some states raise their taxes on sports betting. Among the jurisdictions most frequently cited by attendees as the most likely to follow suit was New Jersey.

At the conference, Robert Stoddard, a lead US tax partner of gaming for KPMG, stated that state-level sports betting taxes are probably going to take a similar course to those imposed on alcohol and tobacco. In other words, states think they can increase taxes without changing how people shop.

Flutter Consistent with the Tax View for Sports Betting

Jackson slammed Illinois' graduated tax plan when Flutter released second-quarter earnings in August. He cautioned that states that adopt that model or increase sports betting taxes generally run the risk of driving gamblers to illegal sportsbooks or sweepstakes operators.

Jackson claimed in an interview with The Financial Times that because companies like FanDuel and DraftKings have more ways to increase their spending and deal with rising excises, smaller participants are more penalized by higher taxes than larger ones.

Additionally, he pointed out that bettors are sensitive to cuts in advertising expenditures. Jackson gave the example of New York, where he said that a large number of FanDuel bettors cross the border into New Jersey because FanDuel provides more extravagant incentives there because of reduced taxes.