DraftKings Feels Taxation Heat, Down 10% Today
DraftKings Feels Taxation Heat, Down 10% Today
By:Mike Butler
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
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.