New Jersey Legislators to Reconsider Prediction Market Tax Proposal This Fall

New Jersey legislators are poised to re-examine a proposal for taxing prediction markets when the assembly reconvenes in the autumn. The measure, which aims to generate additional state revenue, did not advance to a floor vote before the summer break. This legislative effort follows its successful passage through budget committees in both legislative houses, though these votes were cast along party lines.

The current version of the bill suggests implementing a 9% surtax on the net income generated by prediction market operators. However, amendments introduced in the Senate raised concerns about the legislation's potential breadth, leading to its current stalled status. Assembly Speaker Craig Coughlin, a primary advocate for the bill in the lower chamber, indicated that the proposal would undergo further review during the summer. Coughlin stated, "We're planning on looking at that over the summer and into the fall. I think there's every chance we'll pass something out. We'll make sure it's right." He clarified that the revised Senate text prompted fears it might unintentionally impact financial instruments beyond prediction markets, such as the stock market, an outcome "clearly that was never the intent."

This legislative push occurs amidst increasing legal challenges for prediction market platforms like Kalshi and Polymarket, particularly concerning contracts related to sports. In April, a split panel from the U.S. 3rd Circuit Court of Appeals determined that Kalshi's sports wagering contracts are classified as futures trades and fall under the exclusive regulatory authority of the Commodity Futures Trading Commission (CFTC). Olivia Chalos, Deputy Chief Legal Officer for Polymarket, warned that state efforts to regulate prediction markets "will likely face significant federal preemption challenges" given their federal classification.

The New Jersey Office of Legislative Services (OLS) has provided financial projections, estimating that the proposed surtax could yield between $10.3 million and $15.3 million for the state during the present fiscal year. Nonetheless, the OLS report cautioned that future revenue streams are uncertain due to the relatively nascent nature of the prediction market industry. It also noted that major events, such as the 2026 FIFA World Cup, could temporarily boost activity, yet simultaneously warned that prediction markets might divert revenue from established casinos and sportsbooks, thereby impacting existing state tax collections.

The proposed taxation has met strong opposition from UNITE HERE Local 54, the union representing casino employees in Atlantic City. The union contends that prediction markets pose a direct threat to casino jobs and enable participation by individuals as young as 18, circumventing New Jersey's legal gambling age of 21. Furthermore, they argue that imposing a state tax on these platforms could inadvertently bestow legitimacy upon them. Donna DeCaprio, President of UNITE HERE Local 54, voiced her concern, stating, "If the state taxes prediction markets, it appears to legitimize them. Jobs in New Jersey have been lost and will continue to be lost as a result of this." She added that while sponsors aim to level the playing field, "prediction markets are an existential threat to our jobs. This bill is not the solution."