NJ Gov. Phil Murphy has added the Garden State to the list of states looking to increase their sports betting tax rate.
Murphy unveiled his proposed FY2026 budget Tuesday, and it includes an NJ sports betting and online casino tax bump to 25%. New Jersey taxes sports betting revenue at 13% and online casinos at 15%.
An industry source told LSR that because of the election year in New Jersey and the legislature’s generally friendly attitude to the gambling industry, it is unlikely to pass at the proposed rate.
“New Jersey is unique in this space, because of the deep history with the casino industry, we birthed PASPA, we feel protective, and this is an industry that’s done well by us and done well by them,” the source said. “People get what that means. People are focused that this will end up somewhere around the same place, maybe a little higher, but keeps us in a competitive tax rate.”
NJ budget proposal
The Summary of Budget Recommendations for FY2026 proposes expenditures surpassing a record $58 billion.
It also includes a surplus of $6.3 billion, thanks partly to the $402.4 million in additional revenue from online casino gambling and sports betting. Of that additional revenue, $322.6 million would go to the Casino Revenue Fund, while $80 million would go to the General Fund.
Lawmakers have a June 30 deadline to pass the budget.
Legislator reaction to NJ sports betting proposal
With an election in the state this year, an industry source told LSR that legislators are not eager to raise taxes. They also said there is recognition of how the sports betting industry has grown financial and tech sector jobs in the northern part of the state, separate from the southern Atlantic City casino industry.
The proposal has already garnered bipartisan opposition in the legislature.
“Simply put, doubling the tax on online sports betting and iGaming is putting a New Jersey success story at significant risk,” Sen. John Burzichelli and Sen. Michael Testa said in a statement.
Impact on industry
A report from Truist Securities notes that the proposal will be negative for gaming stocks. The analysis also said the proposed rate should have been higher, noting neighboring New York’s 51% rate.
The report notes a leading regulatory state like New Jersey proposing tax hikes could drive other markets to as well. Overall, the report’s main takeaways:
- Higher sports betting tax rates to plug deficits could be a positive step for online casino legalization.
- Market leaders like FanDuel and DraftKings are best positioned to weather the increases.
Sports betting tax hike proposals
Two other prosposed budgets this year have sports betting tax hikes.
In Ohio, Gov. Mike DeWine proposed in his latest budget to double the tax to 40% from 20%. He previously doubled the tax to 20% from 10% in 2023.
Maryland Gov. Wes Moore has also proposed doubling the state’s tax rate to 30% from 15%.
Last year, Illinois went from a 15% tax rate to a tiered system up to 40%.
