Online Gambling Giants Keep Beating The Odds, Even As Tax Crackdown Looms

Macquarie Equity Research analyst Chad Beynon said online gaming companies are likely to beat expectations in the second quarter of 2025, as the outlook for the year improves despite ongoing regulatory challenges.

Beynon noted that online gaming stocks have climbed 12% over the past month—outpacing the S&P 500's 4% gain—despite ongoing regulatory noise in the U.S.

The analyst attributed the rally to strong online sports betting (OSB) hold rates, especially in June, which are tracking around 13% mid-month.

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For the second quarter of 2025, Beynon now expects an industry-wide hold rate of roughly 11%, with potential record gains for DraftKings Inc DKNG (up 150 basis points year-over-year) and Flutter Entertainment FLUT (up 80 basis points), based on New York market data.

Beynon highlighted that regulatory developments remain a key concern. After Illinois introduced a roughly 50-cent per-bet tax on online sports betting starting July 1—and both Flutter and DraftKings confirmed they'll pass this cost on to users by Sept. 1—attention has turned to New Jersey.

Investors are closely watching for potential updates next week, as the state considers raising tax rates on sports betting and iCasino, which would make it the fourth this session to increase taxes on online operators.

Maryland and Louisiana have already raised their sports betting taxes to 20% and 21.5%, respectively, and Beynon expects New Jersey to follow with a 5–7 percentage point hike to 20–22%.

Beynon said the 2025 outlook for the online gaming market remains positive, despite rising tax pressures.

He pointed to three key drivers: strong second-quarter sports betting hold rates, faster growth in betting volume, and better-than-expected gains in iGaming.

As a result, the analyst now projects 2025 online gross gaming revenue to grow 25% year-over-year, up from his earlier estimate of 20%.

Overall, Beynon named several top picks in the online gaming sector.

He highlighted Sportradar Group AG SRAD and Genius Sports Limited GENI as lower-volatility ways to gain exposure to global sports betting, with strong potential from the U.S. shift toward in-play wagering.

DraftKings, with full North American exposure and a leading market share, offers the most upside from further U.S. legalization and potential international growth.

He also favors Rush Street Interactive, Inc. RSI for its small-cap appeal, lower sensitivity to sports hold rates, and strong iGaming niche in Canada and Latin America.

Lastly, Flutter stands out for its unmatched global footprint, best-in-class hold, and a successful M&A strategy.

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