DraftKings Reverses Surcharge Decision Amid Backlash
Transcript
00:00Let's start off with Sam, bringing him back on the show here, second time this week.
00:06Sam, thanks for coming on.
00:07Let's dive into the very latest.
00:09You've had now some time to unpack the story about DraftKings, where a couple of weeks
00:15ago they come out and they say, hey, look, if you win money with us, we're going to take
00:19a very small piece of your pie and you won't even notice it.
00:24That got a lot of backlash, social media, everywhere else.
00:26They decide to pull the plug on that, making that announcement a couple of days ago, Sam.
00:31And, you know, obviously you're reporting on this stuff, but you also have an opinion
00:34clearly on this.
00:35Why do you think DraftKings decided to go from one extreme to the other here?
00:40Yeah, Craig, it's been an eventful last couple of days since DraftKings first announced the
00:48surcharge, which really caught a lot of people off guard.
00:51It was going to come to states like New York and Illinois, Pennsylvania, that have high
00:55taxes on sports betting.
00:57So they've talked for a while about, you know, passing this down to the better in some way.
01:01No one thought it was going to be an actual fee that shows up on your bet slip.
01:05A lot of people thought, hey, maybe they could just make the odds worse.
01:07So that's one of the most interesting parts here is why they chose to do this whole announcement.
01:12And then a few days later, they decide, hey, just kidding, we're not going to go through
01:16with it.
01:17Now, that announcement actually came a couple hours after FanDuel said that they would not
01:21be considering such a fee, which a lot of people had speculated, maybe if FanDuel does
01:25it and DraftKings do it, you'll have the two biggest players in the market kind of leading
01:29the way and it won't impact DraftKings as much.
01:32But with FanDuel saying we won't do it, that left DraftKings pretty much on an island.
01:37And they came out two hours later and said, we're not going to have it.
01:40So if I had enough space right now in my home studio to take a victory lap, I would.
01:44You know, I predicted that FanDuel wouldn't do this.
01:46Why would they?
01:47They really had no reason to.
01:49They've been weathering the storm in high-tax states, just like DraftKings has.
01:53So really interesting to see them come out and say, hey, we're not going to end up doing
01:56it.
01:57Now we have some fallout from that.
01:59How is that going to affect their business going forward?
02:01They had projected that they would lose about $50 million just in the next four months from
02:06Illinois raising its tax alone.
02:08So does that mean they're going to lose $150 million from Illinois next year?
02:13How are their investors going to react to that news that they won't be making up this
02:16money in that way?
02:18And are you going to have the fee being passed down to the bettors just in a different form?
02:22Is it going to be worse odds like we've talked about in the past?
02:25Quite frankly, I'm wondering why that wasn't the case to begin with.
02:29Maybe that means it's too hard for them to do.
02:31Maybe that means it's completely off the table.
02:33So there's a lot of burning questions kind of in the wake of DraftKings rescinding its
02:37announcement.
02:38Now the stock is back up a little bit today to about $33 a share.
02:42It dropped 18% after the news that they would add the surcharge just two weeks ago.
02:47So it was a big impact on the stock market.
02:50Some people were thinking maybe they were just testing the waters, but why test the
02:53waters if the stock is going to react so much?
02:55So DraftKings is different than one of those companies like Caesars, different than Flutter,
02:59which owns FanDuel even, and really they are beholden to their investors.
03:03There's a lot of pressure to show a profit, especially because the U.S. and online sports
03:08betting and iGaming are really their only operations.
03:10They don't have other sectors of the business they can lean on as much like these other
03:14companies.
03:15So I think it's really interesting that they decided to do away with this thing.
03:19But now it's going to be even more interesting to see what happens as a result in these states,
03:24whether it's bettors, whether it's investors, it really impacts a lot of people.