Coming soon…
DraftKings sportsbook announced last week that it will implement a 0.25% surcharge on winning wagers in “high tax” states in 2025.
sportsbooks skew the odds in their favor to ensure they generate long-term profit
The path to profitability is one that is already rarely traveled by the majority of sports bettors. Sportsbooks skew the odds in their favor to ensure they generate long-term profit, meaning that most sports bettors, many of whom never graduate from the “casual” stage of betting, lose more money than they win.
DraftKings bettors in Illinois, Pennsylvania, New York, and Vermont will find it even harder to push their accounts into the green once the surcharge is implemented. But to what extreme will the effects be felt, and how will sports betting change in those states?
Here’s what to expect from the DraftKings surcharge.
Results of the DraftKings surcharge
DraftKings will attach a 0.25% tax to all winning bets. That effectively reduces the odds value of every line by a varying number of points, the exact amount of which is determined by the listed odds price.
Essentially, bettors are playing odds worse than the ones advertised on the site. Here’s a look at how odds values and payouts will change once the surcharge is implemented.
| DraftKings Surcharge Changes (Assuming $10 Bets) | ||||
| Odds Value | Effective Odds | Odds Payout | Effective Payout | Net Change |
| -250 | -257 | $4.00 | $3.89 | -$0.11 |
| -200 | -205 | $5.00 | $4.88 | -$0.12 |
| -150 | -154 | $6.67 | $6.49 | -$0.18 |
| -110 | -113 | $9.09 | $8.85 | -$0.24 |
| 100 | -103 | $10.00 | $9.71 | -$0.29 |
| 150 | 146 | $15.00 | $14.60 | -$0.40 |
| 200 | 195 | $20.00 | $19.50 | -$0.50 |
| 500 | 488 | $50.00 | $48.80 | -$1.20 |
| 1000 | 975 | $100.00 | $97.50 | -$2.50 |
| 10000 | 9750 | $1,000.00 | $975.00 | -$25.00 |
The main takeaway is the overall loss of value. Odds were reduced by as much as +250 at the upper extreme of +10000, while an even-money bet of +100 had an effective payout equivalent to that of -103 odds.
Sportsbooks make money due to the law of large numbers, which states that the true average becomes more accurate as the sample increases. In betting terms, this means that outliers—bettors that overcome the system or that hit a massive parlay bet—won’t greatly alter sportsbooks’ bottom line since the odds are tilted in their favor, and the majority of people still lose money.
Turning a profit
Most sports bettors bet on parlays, or multi-layered bets that require every piece of the bet to hit for the parlay to cash. Parlays offer large potential payouts but are usually harder to win than standalone straight bets.
According to UNLV’s Center for Gaming Research, online sportsbooks profit $0.32 for every dollar bet on a parlay compared to just $.06 per dollar overall.?
This is relevant since parlay bets often involve spread or prop bets, which are usually set at -110 odds for both outcomes (with exceptions).
A $20 wager on a three-leg parlay with legs of -110 odds each would normally result in +596 odds and a $119.15 profit. The DraftKings surcharge would reduce that to effective odds of +581 and a payout of $116.17.
While that might seem insignificant in the short term, it greatly alters the long-term path to profitability.
Bettors need to hit 52.4% of bets at -110 odds to generate a profit. 50.1% of bets at +100 will do the trick, and anything above 20% of bets at +500 will put bettors in the green.
instead of hitting 52.4%, bettors will now need to reach 53.8% accuracy
As highlighted above, the new DraftKings surcharge changes to payout for a $10 bet at -110 odds from $9.09 to $8.85, the normal amount for -113 odds. That means that instead of hitting 52.4%, bettors will now need to reach 53.8% accuracy to keep their accounts in the green.
Again, the 1.4% increase may seem small, but it represents a 2.7% increase on the previous accuracy in a system that’s designed for bettors to lose.?
DraftKings is the only company planning to add a surcharge. It will apply the surcharge in states that exceed the 20% tax barrier.