Illinois raising OSB taxes again a last minute surprise, says BofA

BofA notes Illinois passed their FY26 budget this weekend with an incremental fee for online sports book operators, who will be charged 25c for each wager up to 20M wagers and 50c for each additional wager over 20M. Initial budget proposals in Illinois did not include any incremental taxes for OSB operators and this was “a very unexpected last minute addition” given the significant increase in taxes last year, according to the analyst, who notes that DraftKings (DKNG) and FanDuel (FLUT) are the only two operators that collect over 20M wagers annually in Illinois. The firm estimates this incremental fee to increase their effective tax rate to over 50% from about 35% currently, but expects DraftKings to explore various mitigation strategies, including lower promotions, passing part or all of the fee through to customers or changing merchandizing to incentivize lower effective tax rate bets. While also noting that New Jersey, Louisiana, North Carolina, and Ohio currently have proposals to increase their online sports betting tax rates and that each of those states should finalize their budget by the end of the month, the firm says Illinois generally has been the most willing to move gaming tax rates and perennially faces a budget deficit, so “this fee could prove a one-off.” BofA has a Buy rating on DraftKings shares.