Peter Jackson, CEO of Flutter Entertainment, has raised alarms over recent proposals in several U.S. states to increase gambling taxes. His concern? Such hikes might inadvertently push consumers toward unlicensed, untaxed operators, undermining both regulated businesses and state revenues. It’s a warning that legislators would do well to heed, especially in light of the complexities of managing an ever-growing online gambling market in the United States. The challenge for lawmakers is to recognise that in their quest to maximise tax revenue, they could be playing directly into the hands of unlicensed operators. The stakes have never been higher, and the price of getting it wrong could be catastrophic.
Unlicensed undercut
Jackson’s critique centres on the impact of elevated taxes on market behaviour. Larger companies like Flutter, with its FanDuel brand, are better positioned to absorb higher taxes compared to their smaller rivals. However, he cautions that even major players might struggle to compete with black market operators who avoid paying taxes altogether. These unlicensed operators can offer more competitive odds, lower prices, and an enticing array of promotions that regulated firms simply cannot match under increasing tax burdens.
This tax-driven migration to illegal platforms poses a serious challenge. Customers seeking better deals might turn to offshore, unregulated websites that offer anonymity and lower overhead. The consequence? States could lose out on much-needed tax revenues and find themselves locked in a futile race to out-tax the untaxed.
Jackson made it clear that his plea is not one of corporate self-interest. Rather, it’s a warning rooted in economic principles. “If taxes are pushed too high, people will use illegal operators, and tax revenues will go down,” he told The Financial Times. He even referenced the Laffer curve—a famous economic model suggesting that higher tax rates don’t necessarily yield higher tax revenues. At a certain point, increased taxation simply incentivises avoidance.
Growing threat in a booming market
The expansion of sports betting in the U.S. has been nothing short of explosive since the Supreme Court lifted the federal ban in 2018. Today, 38 states, including Washington D.C., allow legal sports betting. Flutter, one of the largest operators globally, has capitalised on this boom, contributing a substantial portion of the ￡3.2 billion it paid in taxes worldwide in 2023, with the U.S. market accounting for a third of that sum.
However, this expansion comes with growing pains. As Jackson pointed out, New York’s punishing 51 percent tax rate on sports betting—the highest in the nation—has already driven some FanDuel customers to neighbouring New Jersey, where the tax rate is lower, and the incentives are better. “If customers feel they can get better value elsewhere, they will,” Jackson warned, underscoring the delicate balance between maintaining competitive customer offerings and meeting tax obligations.
What’s at stake
The problem is not limited to New York. Illinois and Ohio have also recently raised taxes on gambling revenues, while New Jersey lawmakers are contemplating increasing taxes on online gaming to 30 percent. These moves, while potentially lucrative in the short term, risk undermining the very markets they aim to regulate. Higher taxes could lead to higher costs for customers, eroding the appeal of regulated operators and making unlicensed platforms an attractive alternative.
Moreover, the illegal gambling market is vast, accessible, and deeply embedded. These platforms do not adhere to state regulations, do not contribute to public funds, and operate without any of the safeguards that protect consumers in legal markets. From a public policy perspective, enabling this shift would be disastrous, as states could see both diminished revenues and heightened risks to problem gambling, fraud, and money laundering.
The Flutter approach
For its part, Flutter appears committed to navigating the challenges of the U.S. market while advocating for a sensible tax structure. Jackson has suggested an optimal tax rate of around 18 percent, a level he argues would generate stable revenues for states while keeping consumers within the regulated fold. “Larger players like us can adjust,” he said, referring to the company’s ability to leverage its scale to offset the impact of higher taxes. But Jackson is quick to point out that this flexibility is not universal, especially among smaller operators that lack the resources to compete with black market alternatives.
Flutter’s strategy, particularly in the U.S., is one of sustainable growth. The company expects to double its core profit by 2027, with the U.S. accounting for nearly half of that figure. However, Jackson and his team understand that this trajectory depends on a stable, competitive, and regulated market—one that strikes the right balance between encouraging legal gambling and discouraging illegal operators.
As states move to squeeze more tax revenue from a booming industry, Jackson’s warning offers a sobering reminder: push too hard, and the market may slip from your grasp entirely. The allure of unlicensed operators is real, and the consequences could be dire.
In the end, the delicate balance between tax policy and market regulation will determine the future of legal gambling in the U.S. Get it wrong, and the illegal operators are waiting.
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