DraftKings' Tax Strategy: Will It Impact Market Share?
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00:00Is DraftKings making the first big step among the sports betting operators to basically say we don't like how much money we're being taxed in some states, and so therefore we want a bigger piece of the pie?
00:16Now, they didn't say that. I'm saying that, Sam. What they're saying is that we don't want a bigger piece of the pie, and we don't even want a slice. We just want a sliver.
00:25Is that fair to sports bettors to have to lose a sliver of their earnings?
00:31Well, the good news for sports bettors is that this change is only coming in four states, and they'll actually get to decide whether or not it's fair.
00:40If you don't like the small, maybe 25-cent addition, you're going to have to pay on some winnings in a few states.
00:48You can go over to another app like BetRivers. You can go to another app like FanDuel, ESPN Bet.
00:53So DraftKings is really kind of going to be the test case for whether passing the tax, so to speak, down to the customer will work out.
01:02Now, Wall Street is pretty mixed on whether it worked out. Some investors are saying they could see a large portion of DraftKings' market share getting impacted by this with the big fish customers, the ones that bet a lot of money.
01:14Going over to other apps, because obviously if you have a fee and you're betting a lot more money, you're going to see the impact bigger there.
01:22Other investors think that maybe they can build up customer loyalty with the smaller, less price-sensitive customer that DraftKings has grown so accustomed to and has really grown to love and push parlays kind of down their throat.
01:36So DraftKings thinks that they can win on the product in this case.
01:40But you have some other investors coming out. One group, Regulus Partners in the UK, called it economically illiterate and published a review on it saying how to lose market share and undermine brand credibility all in one step.
01:54So you have the reaction from Wall Street really mixed as to whether or not this is going to be something that bettors ignore or if they move on to other apps.
02:03So we'll know if it spreads to other apps probably when FanDuel releases their earnings next week.
02:08A lot of people think whatever they say, the rest of the industry will follow.
02:12Obviously, FanDuel and DraftKings are two of the biggest players in the state.
02:15So it's another wait and see here, but really interesting development.
02:19And it's going to come in 2025. So that's when we'll know whether or not bettors think it's fair or not.