Entain PLC (LSE:ENT) and Flutter Entertainment PLC (LSE:FLTR) are expected to face increased costs after a "last-minute" proposal for a new tax on online sports betting was added to the Illinois state budget tax, effective from 1 July 2025.
The tax introduces a $0.25 charge on the first 20 million bets and 50 cents on all bets thereafter.
Based on Illinois data, Flutter’s FanDuel would have paid $74 million under the new structure for the year ended March 2025, analysts at Citi estimated, which could impact Flutter’s US and group EBITDA by around 6% and 2%, respectively in 2025, before any mitigation.
UBS analysts reckoned the EBITDA hit to Flutter could be $39 million, or 1.2% of group EBITDA, and 3.2% of US EBITDA.
For FY26, UBS projects a 1.8% group EBITDA impact before mitigation. UBS added that FanDuel has a history of mitigating tax impacts, reducing prior tax-related headwinds by up to 50% in the following years.
Entain, which owns a 50% share of BetMGM, a US joint venture with MGM Resorts, has lower exposure, with UBS estimating the FY25 impact at $3 million, or 2.2% of BetMGM EBITDA. The group impact is considered non-material.
UBS commented: “Our view is that industry taxation presents a risk to near-term operator earnings, but medium-term earnings expectations can hold through the simultaneous top-line opportunity generated by tax hikes.”
UBS maintains 'buy' ratings on both companies and noted that while the new tax structure is uncommon and may pressure low-margin bets, Flutter’s market leadership and higher win margins offer potential resilience.