Flutter Entertainment (NYSE: FLUT) CEO Peter Jackson emphasizes that states should carefully assess their implementation and possible increase of online sports betting taxes, as excessively high taxes may push bettors towards unregulated offshore markets. 

In a conversation with The Financial Times, Jackson mentioned that the optimal rate for internet sports betting in the US would be 18%. That amount exceeds what operators in New Jersey and several other states are being charged, yet it falls considerably short of what gaming companies are paying for that type of betting in Illinois, New York, and Pennsylvania. 

Jackson referenced the Laffer curve as the foundation for his argument. Named after economist Arthur Laffer, the curve demonstrates the connection between government tax rates and the revenue collected.

"It suggests that taxes could be too low or too high to produce maximum revenue and that both a 0% income tax rate and a 100% income tax rate generate $0 in receipts,” according to Investopedia.

Based on that, Jackson posits that a “Goldilocks” situation of neither too high nor too low would be ideal for both states and sportsbook operators. 

Critical Moment for Flutter Tax Remarks 

Dublin-headquartered Flutter is the parent organization of FanDuel, the biggest online sportsbook operator in the United States. Jackson’s remarks regarding taxes on US sports betting arrive as certain states have raised taxes on this wagering type, while others are considering similar hikes. 

Last year, Ohio increased its tax on online sports betting from 10% to 20%. In July, Illinois implemented a graduated tax system where major operators like FanDuel and DraftKings (NASDAQ: DKNG) are taxed at higher rates than their smaller competitors. In New Jersey, there has also been an effort to increase the sports betting tax, while Maryland's lawmakers are looking at the possibility of removing or reducing promotional deductions. 

Jackson’s remarks came just a few days following the Global Gaming Expo (G2E) in Las Vegas, where some industry analysts pointed out that it’s only a matter of time until certain states raise sports betting taxes. New Jersey was one of the locations frequently cited by participants as the probable next contender to take that step. 

Robert Stoddard, a chief US tax partner for gaming at KPMG, stated during the conference that state-level sports betting taxes are expected to mirror the trends seen with taxes on alcohol and tobacco. In other words, governments think they can increase taxes without changing consumer behavior. 

Flutter Maintains Consistency on Sports Betting Tax Perspective 

When Flutter presented its second-quarter results in August, Jackson condemned the graduated tax system used in Illinois, cautioning that states adopting that model or increasing sports betting taxes overall may drive bettors to illegal sportsbooks or sweepstakes entities. 

In an interview with The Financial Times, Jackson stated that increased taxes impact smaller companies more harshly than larger ones, as entities like FanDuel and DraftKings possess more options to boost their expenditures and manage elevated excises. 

He also mentioned that gamblers are responsive to cuts in promotional expenses. Using New York as an example, Jackson noted that numerous FanDuel bettors travel to New Jersey since FanDuel provides more generous incentives there owing to lower taxes.