Shares of DraftKings Inc. (NASDAQ:DKNG) and Flutter Entertainment Plc (FLTR), the parent company of FanDuel, took a hard hit on Tuesday after the Illinois Senate passed legislation aimed at increasing taxes on sports betting.

The proposed bills outline a shift from the current flat tax rate of 15% to a new graduated format, which could potentially reach as high as 40% on the adjusted gross revenue generated by sports gaming companies. This legislation, which is part of the Illinois budget package, now moves to the state’s House, which is scheduled to reconvene on Tuesday.

DraftKings experienced a significant decline of up to 10% on Tuesday, marking its most substantial drop since August, while US shares of Flutter were down by as much as 5.6%.

Analyst Bernie McTernan from Needham highlighted that concerns over a potential increase in tax rates have been looming among investors ever since the proposal surfaced months ago. In a note to clients, McTernan emphasized the shift in focus towards the long-term implications, anticipating heightened apprehension among investors regarding the impact of elevated tax rates. He further speculated on the potential for companies to offset these increased taxes through reduced investments in customer acquisition.

Meanwhile, Rush Street Interactive Inc. shares remained unchanged, while Penn Entertainment Inc.’s shares saw a decline of up to 1.6%. Based on their current market share, McTernan noted that these companies may face a comparatively lower tax burden than DraftKings.