Despite increases in taxes by many US states, major online sports betting companies such as DraftKings and Flutter Entertainment, the parent company of FanDuel, are expected to remain stable, as indicated by a new Fitch Ratings report from June 16, 2025.
Higher Betting Taxes May Pressure Margins, Yet Top Online Operators Maintain Solid Financial Health
Increased taxes in Illinois, Maryland, and Louisiana, along with potential hikes in New Jersey, North Carolina, and Massachusetts, could impact profits. However, Fitch analysts believe this will not affect the credit ratings of leading firms like DraftKings and FanDuel. The report noted these companies maintain strong cash flow, consistent growth, and effective financial management.
One significant proposal under discussion is in New Jersey, where lawmakers are considering doubling the tax rate on adjusted gross revenue from 13% to 25%. While this would increase pressure on operators’ earnings, experts suggest no single state presents enough risk to cause a credit downgrade.
Nonetheless, the broader trend of higher tax rates could reduce industry profitability. Companies may attempt to offset costs by altering odds or introducing additional fees, but this approach carries competitive risks. Rivals may attract customers with better offers, and unregulated or alternative betting options could gain popularity.
Sports Outcomes Hurt Margins Temporarily While Legal Expansion Offers Future Opportunities
Beyond regulatory issues, recent sports outcomes have benefitted bettors, resulting in a short-term decline in operator profits. Events like the NFL season and March Madness saw numerous favorites winning, benefiting players but impacting betting platforms. Fitch analysts emphasize that such fluctuations are inherent to the industry and already considered in their projections.
Looking ahead, there is optimism about the potential expansion of legal sports betting into the 20 US states that have not yet legalized it. This growth could involve upfront costs to acquire new players but may drive long-term industry expansion and generate new revenue streams for state governments in need of funds.
Fitch’s primary forecast assumes no major new state entries in the near term. Nevertheless, DraftKings is expected to see its EBITDA margin increase to about 23% by 2027, driven by reduced marketing expenses and normal sports results. Flutter’s US operations should enhance margins from 16.5% in 2024 to 20% by 2027.
Simultaneously, BetMGM, a partnership between MGM Resorts and Entain, has raised its 2025 earnings target to $100 million. Fitch noted that BetMGM remains independent and will not negatively affect its parent companies’ credit ratings.
Overall, online gaming companies continue to demonstrate resilience despite regulatory and market challenges. Their diverse revenue streams and solid fundamentals help them maintain robust financial positions.
- SCCG Management. The Gambling Industry’s Global Connector. Access Here.
- Source: SCCGManagement.com