Flutter CEO Says States Need to Be Careful About Sports Betting Taxes

Flutter Entertainment (NYSE: FLUT) CEO Peter Jackson says states need to be measured in how they apply and potentially raise online sports betting taxes because pushing those levies too high could drive bettors to unregulated offshore markets.

In an interview with The Financial Times, Jackson said the ideal rate across the US on internet sports wagering would be 18%. That’s above what New Jersey and some other states currently charge operators, but well below what gaming companies pay on that form of betting , and Pennsylvania.

Jackson cited the Laffer curve as the basis for that argument. Named for economist Arthur Laffer, the curve illustrates the relationship between government tax rates and collected revenue.

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.

On that basis, Jackson is arguing a “Goldilocks” scenario of not too high and not too low would best suit both states and sportsbook operators.

Dublin-based Flutter is the , which is the largest online sportsbook operator in the US. Jackson s comments on US sports wagering taxes come as some states have already boosted taxes on this form of betting while others are eyeing similar increases.

Last year, Ohio doubled its online sports betting tax to 20% from 10%. In July, Illinois moved to a graduated tax system under which large operators such as FanDuel and DraftKings (NASDAQ: DKNG) pay higher rates than smaller rivals. There’s also been a push in New Jersey to hike that state’s sports betting tax, and policymakers in Maryland are examining eliminating or paring promotional deductions.

Jackson’s comments arrived just days after the Global Gaming Expo (G2E) in Las Vegas at which some industry observers noted it’s simply a matter of time before some states increase sports wagering taxes. New Jersey was among the jurisdictions most mentioned by attendees as the likely next candidate to do so.

Robert Stoddard, a lead US tax partner of gaming for KPMG, said at the conference that sports betting taxes at the state level are likely to follow a similar trajectory to the levies applied to alcohol and tobacco. Said differently, states believe they can raise taxes without affecting consumer habits.

When Flutter delivered second-quarter results in August, Jackson criticized the deployed in Illinois while warning that states that follow that blueprint or raise sports betting taxes across the board risk chasing bettors to black market sportsbooks or sweepstakes operators.

In The Financial Times interview, Jackson said higher taxes are more punitive for smaller players than they are for bigger firms because operators like FanDuel and DraftKings have more avenues through which they can augment spending and contend with higher excises.

He also noted bettors are sensitive to reductions in promotional spending. Citing New York as the example, Jackson said many FanDuel bettors there cross the border into New Jersey because FanDuel offers more lavish incentives there due to lower taxes.