FanDuel, one of the biggest names in U.S. sports betting, is sounding the alarm. They’re urging lawmakers across multiple states to pump the brakes on tax hikes before the industry buckles under the strain.
The company’s message? If this keeps up, the regulated betting scene might not be around long enough to deliver the tax windfalls states are banking on.
Taxing Trouble: Industry Cries Foul as Margins Collapse
Cesar Fernandez, a top government affairs executive at FanDuel, made his case loud and clear this week at the National Council of Legislators from Gaming States (NCLGS) conference. He didn’t sugarcoat it.
He warned that between the marketing budgets, tech costs, staffing, bonuses, and sky-high state taxes, sportsbooks are barely scraping by. Despite a 10% national hold rate — the slice of the betting pie operators actually keep — profits are thin. Painfully thin.
According to FanDuel, sportsbooks only net $1.55 for every $100 wagered. That’s a 1.5% margin.
For comparison, supermarket chains like Kroger or Tesco operate at around 2.5–3% margins — and they’re considered razor-thin too.
“We’ve gone from being viewed as contributors to being seen as cash cows,” Fernandez said. “There’s this belief that gambling companies are swimming in profits — but the math just doesn’t hold up.”
New York’s 51% Tax: “Brutal” and Bad for Business
It’s not just FanDuel complaining. Across the industry, eyebrows are rising over New York’s towering 51% tax on gross gaming revenue. Operators call it unsustainable.
Illinois isn’t far behind. The state recently slapped a $0.50 fee on every single bet — not on profits, but on the act of betting itself. That’s triggered a domino effect. Big players like DraftKings, FanDuel, and Fanatics Sportsbook are now passing that cost straight to users.
One-sentence pause: It’s not just bad for business — it’s potentially pushing customers away.
You can already see the cracks. Users grumble on Reddit and X (formerly Twitter) about worse odds, higher fees, and fewer bonuses. Operators are trimming promotions to stay afloat.
What FanDuel Wants: Less Tax, More Casino
FanDuel isn’t just shouting into the void — they’ve got a plan. Well, two, actually.
First, they want state governments to reconsider these eye-watering tax rates. Second, they’re pushing for online casinos to be legalised in more states.
Why? Because online casinos, unlike sports betting, don’t depend on unpredictable events like underdog wins or referee calls. The margins are healthier. The revenue is steadier. And the promotional costs are lower.
Right now, only seven states have legalised online casino gambling. FanDuel and friends are lobbying hard to bring that number up.
Here’s a snapshot of where online casinos stand today:
| State | Online Casino Legal? | Notes |
|---|---|---|
| New Jersey | ✅ Yes | One of the most mature online markets |
| Pennsylvania | ✅ Yes | Strong revenue, regulated environment |
| Michigan | ✅ Yes | Rapid growth since 2021 launch |
| West Virginia | ✅ Yes | Smaller population but legal market |
| Connecticut | ✅ Yes | Partnered with tribes and big operators |
| Delaware | ✅ Yes | Early adopter, limited competition |
| Rhode Island | ✅ Yes (recent) | Live as of March 2024 |
Fernandez points to these examples as proof that there’s room for healthy expansion — if lawmakers are willing to listen.
The Real Risk: Users Fleeing to Illegal Operators
In another panel, FanDuel’s attorney Brad Fischer issued a stark warning. He said the tax pressure isn’t just squeezing profits — it’s pushing people into the arms of unregulated operators.
And this time, the threat isn’t theoretical.
“It’s happening right now,” Fischer said. “And it’s only going to get worse.”
The concern? Sweepstakes casinos and offshore betting sites — neither of which pay U.S. taxes or follow state rules — are thriving. Why? Because they offer better odds, more aggressive bonuses, and zero state surcharges.
And while lawmakers may hope tax hikes will boost public coffers, the opposite could be happening.
One sentence, just to let that sink in.
Players drift away from regulated sportsbooks, and states lose both tax revenue and consumer protection oversight. It’s a lose-lose.
Operators Say They’re Not Anti-Tax, Just Anti-Overkill
Let’s be clear: FanDuel isn’t asking for a free ride. Industry insiders openly acknowledge they should contribute to state budgets — especially considering how fast the sector’s grown since 2018.
But they argue there’s a tipping point. Go too far, and legal operators can’t compete.
One executive summed it up privately like this:
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“We’re not asking for sympathy — just sanity. You can’t tax something into extinction and expect it to keep paying you.”
The math supports the mood. In New York, some analysts say the market has plateaued, and promotional spending has fallen off a cliff. Operators simply can’t afford to compete with aggressive bonuses anymore.
And once the fun disappears for users, so do the dollars.
Political Tensions Simmer Behind the Scenes
States see gambling as a golden goose. But they’re starting to choke the bird.
Lawmakers under budget pressure are leaning heavily on gambling revenue to patch holes in education, infrastructure, and healthcare funding. In election years, that pressure only intensifies.
Behind the scenes, lobbying is in full swing. Trade groups are gearing up for fights in legislatures from Ohio to Maryland. FanDuel, DraftKings, and others are throwing money at the problem — but also facing growing scrutiny.
Meanwhile, consumer advocates argue that if sportsbooks can’t survive without gouging users, maybe the model itself is broken.
That kind of criticism hits a nerve.
But one thing is certain: The future of legal sports betting in the U.S. is no longer a guaranteed win.
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