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New Jersey lawmakers have scaled back a bill targeting prediction markets, stripping out a proposed ban on election, disaster and death-related contracts and keeping only a 9% surtax on operators’ gross income.
The Senate Budget and Appropriations Committee and the Assembly Budget Committee advanced substitute versions of Senate Bill 4447 and Assembly Bill 5336 on June 28, voting 9-4 and 10-4-1, respectively. Both bills now move to a second reading.
Prediction markets tax survives, other rules dropped
As introduced, S4447 would have required prediction market operators offering sports contracts to:
- Obtain a state betting license
- Pay New Jersey’s 19.75% sportsbook tax plus a 10% surcharge.
- Ban markets tied to elections, deaths and catastrophic events.
The Senate committee’s substitute removed all of that, leaving a single 9% surtax on gross income from operating a prediction market — separate from existing gross income and corporate business taxes, and not offset by standard business tax credits.
The Office of Legislative Services projects the surtax could generate $10.3 million to $15.3 million in state revenue. However, it cautioned the estimate doesn’t account for potential cannibalization of existing sports betting tax revenue if prediction markets draw bettors away from licensed sportsbooks.
Sen. Paul Sarlo, the committee’s chairman, called the surtax a “first step” toward leveling the playing field with licensed operators, according to New Jersey Globe.
Supreme Court fight looms over prediction markets tax
New Jersey’s push to tax prediction markets unfolds alongside a separate legal fight. In April, the 3rd US Circuit Court of Appeals ruled that the Commodity Futures Trading Commission has exclusive jurisdiction over sports-related event contracts, blocking the state from enforcing its cease-and-desist order against Kalshi.
New Jersey’s Attorney General’s Office has since asked the US Supreme Court to review that ruling. Justice Samuel Alito granted the state’s request for more time, giving New Jersey until Aug. 4 to file its petition, according to CoinDesk.
Illinois, Kentucky preview prediction markets tax trend
New Jersey’s move follows similar state-level efforts to tax rather than ban prediction markets. Illinois has imposed a 15% gross receipts levy on operators, and Kentucky is pursuing enforcement of a 14.25% consumption tax on transaction fees.
Because New Jersey’s surtax applies to profit rather than trading volume, it spares money-losing platforms while creating a recurring cost for profitable ones — a structure other states may look to as litigation over federal preemption continues.
