New Jersey legislators are planning to re-evaluate a proposal aimed at imposing taxes on prediction markets when the assembly reconvenes in the fall, following the inability to secure floor votes prior to the summer break.
This legislation seeks to implement a 9% surtax on the net income generated by prediction markets as a means to boost state revenue. The proposed bills successfully advanced through budget committees in both legislative houses along party lines but eventually stalled.
Assembly Speaker Craig Coughlin, who is the main backer of the bill in the Assembly, indicated that lawmakers will continue their examination of the proposal throughout the summer, especially after the Senate’s amendments raised some scope-related concerns.
“Our intention is to review that over the summer and into the fall. I believe there is a strong possibility we’ll pass some legislation. We will ensure it’s rightly formulated,” stated Coughlin.
He noted that the modified language in the Senate raised apprehensions regarding the possibility that the bill could unintentionally impact other markets beyond prediction markets.
“There was an idea that we might accidentally influence other sectors, such as the stock market or similar areas. That was never our intention,” Coughlin added.
The original version of the proposal aimed to levy a 10% surcharge on nearly all prediction market contracts, with sports-related contracts also facing New Jersey’s existing 19.75% tax on internet sports betting.
This proposal emerges amid ongoing legal scrutiny faced by prediction market operators like Kalshi and Polymarket regarding their sports-related contracts. A ruling in April by a divided panel of the U.S. 3rd Circuit Court of Appeals determined that Kalshi’s sports wagering contracts are futures trades exclusively regulated by the Commodity Futures Trading Commission.
Polymarket cautioned that efforts at the state level to regulate prediction markets could encounter legal challenges under federal laws.
“Polymarket functions as a CFTC-regulated designated contract market under the exclusive authority of the Commodity Exchange Act, meaning that any state-level attempts to regulate prediction markets are likely to face substantial federal preemption issues,” explained Olivia Chalos, Polymarket’s deputy chief legal officer.
The New Jersey Office of Legislative Services anticipates that the proposed surtax could yield between $10.3 million and $15.3 million for the current fiscal year, though it warned that projections for future revenue remain uncertain given the nascent nature of the prediction markets industry.
The analysis also highlighted that the upcoming 2026 FIFA World Cup might temporarily elevate activity, but also cautioned that prediction markets could potentially diminish revenue from casinos and sportsbooks, hence impacting current state tax collections.
The proposal has faced opposition from UNITE HERE Local 54, representing casino workers in Atlantic City. The union contends that prediction markets jeopardize casino jobs, enable participation by individuals aged 18—despite New Jersey’s legal gambling age being set at 21—and that taxing these platforms could inadvertently grant them legitimacy.
“Imposing a tax on prediction markets may lend them a sense of legitimacy. Jobs in New Jersey have diminished, and this trend is likely to continue as a consequence,” remarked Donna DeCaprio, President of UNITE HERE Local 54.
“While we recognize that the sponsors are aiming to level the playing field and generate tax revenue, prediction markets represent a fundamental threat to our jobs. This bill does not provide a viable solution,” she concluded.