New Jersey lawmakers have recently reached a budget agreement to increase taxes on online gambling and sports betting, though the rate is less than Governor Phil Murphy’s initial proposal. The new tax rate will be 19.75% for both online sports betting and internet gambling, lower than the 25% originally suggested by Murphy in his February budget proposal, according to the Press of Atlantic City. This new tax structure aims to balance state revenue growth with a competitive environment for operators and consumers.
Governor Murphy’s initial plan aimed to raise additional funds for New Jersey’s fiscal needs, which include a record $58.1 billion budget for FY2026. The 25% tax rate was expected to generate around $402.4 million, contributing to a projected $6.3 billion surplus. However, industry groups like the Casino Association of New Jersey and the Sports Betting Alliance opposed the higher rate, arguing it could harm the state’s regulated gaming sector.
Presently, online sports betting is taxed at 13%, and internet gambling at 15%. The revised 19.75% tax rate will reduce expected revenue but still provides a boost to the state budget. Some industry officials worry that tax hikes could push players towards unregulated offshore sites, undermining New Jersey’s legalization efforts in sports betting and online gambling.
The gaming industry strongly opposed the tax increase. The Sports Betting Alliance, representing entities like FanDuel, DraftKings, and BetMGM, argued that higher taxes could discourage legal betting and potentially decrease overall state tax revenue. For instance, FanDuel encouraged its customers to protest the proposed increases. Mark Giannantonio, president of the Casino Association of New Jersey, expressed that a 25% tax could drive consumers back to illegal offshore operators, from which the state would see no tax benefit.
Despite these concerns, New Jersey lawmakers settled on a 19.75% rate, which is closer to those in neighboring states. For instance, Pennsylvania taxes online sports betting at 36%, while New York has a 51% rate. These high rates have raised concerns about diminishing returns, sparking discussions on whether New Jersey’s increased rates could have similar effects.
New Jersey is not the only state increasing taxes on online gambling. Maryland and Louisiana have also proposed or implemented tax hikes. Maryland will raise its sports betting tax from 15% to 20%, while Louisiana will increase it from 15% to 21.5%. Illinois has introduced a tiered tax system with rates as high as 40% based on operator revenue. These changes reflect a broader trend among U.S. states to boost revenue from online gambling.
However, some analysts worry about the long-term impact of these tax hikes. Fitch Ratings recently cautioned that significant increases in online betting taxes might hinder industry growth. Higher taxes could lead to increased operational costs for operators, who might pass on these costs to consumers. This is already happening in Illinois, where major operators have introduced surcharges on bets to offset higher taxes.
- SCCG Management. The Gambling Industry’s Global Connector. Access Here.
- Source: SCCGManagement.com