DraftKings Inc. (NASDAQ:DKNG) is one of the stocks on Jim Cramer’s radar. Cramer mentioned that the “Big Beautiful Bill” could impact the company significantly, as he commented:
“Take the sports betting space, one of the fastest-growing industries in America over the past few years, dominated by DraftKings and Flutter Entertainment, the parent of FanDuel. There was an obscure provision in the Big Beautiful Bill added late in the process that seems like it could impact these companies significantly… Since the Senate unveiled its version of the budget bill in mid-June, the version that included the change to the gambling taxes, the stocks of DraftKings and Flutter have been roaring.
DraftKings rallied nearly 20% in June… and they’re both basically flat in July when people started focusing on this issue. So what the heck is happening here with this taxation thing?… Basically, the new taxation is very bad for professional gamblers or anyone who knows how to win reliably. But those are the last people FanDuel or DraftKings want. In fact, if the budget bill puts these people out of business, it might actually be a good thing for the online sportsbooks.
The truth is, most gamblers on these sports betting platforms lose money. There’s a reason why this is a great business to be in, and anyone with substantial losses really won’t be impacted anyway. Of course, there’s another reason why Wall Street doesn’t seem to be worried about this change in taxation for gambling winnings. There’s a very good chance it might be reversed…
DraftKings and Flutter haven’t even bothered to push back against the new provision. And historically, these companies are very, very vocal about any legislation that hurts their business. I don’t think they’re shedding any tears over this tax provision that drives away gamblers who win too often. We reached out to both DraftKings and Flutter Entertainment for a comment here. DraftKings said they support the new bill to restore the hundred percent deduction for gambling losses… DraftKings sounds like they don’t like the new rules, even if they’re clearly not fighting tooth and nail to reverse them. Ultimately, I think this is something we need to watch, but it doesn’t change my bullish attitude toward DraftKings and Flutter. The thesis here is very simple: These two companies have emerged as an effective duopoly in online sports betting…
Also, because the industry is a lot less competitive than it used to be, DraftKings and Flutter no longer need to offer big incentives to draw new customers, making them more profitable. The gambling tax change is clearly not ideal, but there’s a very good chance it won’t have much impact on either of these companies, and it could even help them. Here’s the bottom line: I still like DraftKings and Flutter, but more important, this is just one tiny example of the work that’s being done all across Wall Street to figure out the impact of this massive new budget bill. Some of it’s straightforward, but like we saw with sports betting, sometimes these new rules might do the opposite of what you’d expect.”
A woman at a betting table paying out customers who won their sports bets.
DraftKings (NASDAQ:DKNG) provides online sports betting, daily fantasy sports, iGaming, and retail sportsbooks, and develops software for sports betting and casino gaming. The company also operates a curated NFT marketplace.
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Disclosure: None. This article is originally published at Insider Monkey.
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