The Illinois Senate passed a new sports betting tax raising sports betting taxation over 140% in 2025
The Illinois Senate passed a new sports betting tax this past weekend that will affect companies like DraftKings (DKNG), raising sports betting taxation over 140% in 2025.
The current tax rate is 15%, and that number is increasing to around 36% in Illinois—a massive increase compared to other legal sports betting states. DraftKings is currently legal in 25 states, and although Illinois is just one of those states, it is certainly one of the larger population states.
DKNG stock had a great start to the year, opening at $34.62 per share, and rallying all the way to $49.57 in March. Since mid-May, DKNG stock has had a tough time rallying and has dropped almost $10 in that span, and over 10% today after the news broke.
Jason Robins, DraftKings’ CEO and co-founder offered some insight for 2024 in the last earnings call: “We successfully launched our online sportsbook in Vermont and North Carolina with highly efficient customer acquisition. Looking ahead, we remain committed to maximizing shareholder value through continued innovation, operational excellence and disciplined capital allocation.”
Can DKNG hold up?
As a sports bettor and fantasy sports nut, I will say that DraftKings exceeds expectations in the customer promotion department. It will be interesting to see if the sports betting giant—which has a physical sportsbook attached to Wrigley Field—can withstand the taxation storm.
DraftKings is down big today, and the implied volatility of the stock for the rest of the year helps us put context around the move today. The expected stock price move through the July options cycle is just +-$4.29, and the stock has exceeded that range today.
With that said, DKNG stock has an expected move of +-$10.18 through Jan. 2025, so the market expects to see more volatility in the next few months.
Bullish on DraftKings in 2024
Bullish DKNG investors and traders may believe that although the taxation shock is affecting the stock price today, the company will be able to withstand the storm and make up for lost profits in other areas of the business and parts of the country. With more states adopting sports betting in a legal way, expansion can certainly soften the taxation blow of Illinois.
Bearish on DraftKings in 2024
Bearish DKNG investors and traders likely think that Illinois may be the first domino in a string of adjustments from other states, and that DraftKings may have a tough time making up for lost profits. If Illinois can increase sports betting taxation in a big way, will other states follow suit?
Tune in to Options Trading Concepts Live every market day at 11am CST for real-time updates on DKNG stock and more.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb Â
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