ESPN BET will launch in New York on August 24th without a tax surcharge on bettors, in a move that juxtaposes DraftKings' move to add a fee to all winning wagers in the state starting in 2025.
The announcement by Penn Entertainment CEO Jay Snowden last week precedes ESPN BET's launch later this month in the state with the country's highest total sports betting handle. Penn, ESPN BET's parent company, bought out WynnBet earlier this year to overtake their license in New York.
Meanwhile, earlier this month, DraftKings announced they would take a percentage of every winning wager in high-tax states — currently New York, Pennsylvania, Illinois and Vermont — starting 2025. Any state that surpasses a threshold of 20% in taxes may also face these taxes on bettors. New York (51%) and Pennsylvania (36%) currently tax those percentages on all gross income from operators. And Illinois recently passed provisions to raise their rate to 40%.
Penn did leave the door open to potentially adding a surcharge in the future, however.
"We find it to be very interesting," Snowden said. "It was unexpected but definitely interesting. You should expect us to be observers. It's not even on our radar. I hesitate to say never but we're really focused on continuing to improve our product.
"We would not be a first mover on something like that. We'll observe it and see what the reaction is."
BetRivers, meanwhile, emphatically stated last week that it would not add a surcharge for customers, saying they prioritize its bettors.
"We put our customers first, it was an easy decision for us," Rush Street Interactive CEO Richard Schwartz said last week.
This is despite a period of change for the company, which completely revamped its loyalty rewards program this month and substantially cut affiliate marketing spending. BetRivers operates in all the states that DraftKings plans to implement its tax, except for Vermont.
At DraftKings, this surcharge will exist on every winning wager, even if the bettor eventually ends a session or month or year with a net loss from other wagers. Bettors are still required to pay separate taxes on all winnings.
DraftKings' first-of-its-kind measure could spell trouble for bettors in high-tax states if other sportsbooks decide to enact similar measures.
