New Jersey legislators are pushing forward a new bill proposing a 9% tax on the gross revenues earned by operators of prediction markets.
The updated bill, referred to as S4447, is a scaled-back iteration of a previous version that mandated licensing for prediction market operators and placed restrictions on the types of event contracts permissible within the state, as well as advocating a higher tax rate. Recently, the New Jersey Senate Budget and Appropriations Committee voted to approve this revised proposal with a margin of 9-4.
Progress of the Revised Bill
This legislation allows the state to impose taxes on operator fees, commissions, or any other revenue generated from the market, rather than taxing the entire volume of event contracts traded.
Prediction markets regulated by the Commodity Futures Trading Commission, such as Kalshi, are legally permitted to function in New Jersey, offering contracts related to various events, including sports events like the World Cup and political elections.
Focus on Operator Revenue Taxation
New Jersey boasts one of the largest and most developed regulated igaming markets globally, achieving USD $2.91 billion in digital casino earnings in 2025, reflecting a 22% increase compared to 2024, alongside revenue from online sports betting reaching USD $1.15 billion, marking an 8.2% year-over-year rise. Notably, over 95% of all sports bets in the state are made online instead of at retail sportsbooks.
The original Senate proposal entailed that prediction market operators providing sports event contracts would be required to secure licenses, akin to sports betting operators, and would be taxed at an equivalent rate. Furthermore, a 10% surcharge was proposed for all other event contracts, with the state tax rate on legally regulated sports betting gross gaming revenue (GGR) standing at 19.75%.
Uncertainty Surrounding Market Size
Several elements from the original legislation were omitted in the amended version, including the prohibition of event contracts that involve political markets or catastrophic occurrences, and the stipulation for operators to enable self-exclusion options.
Estimating the gross income from federally regulated prediction markets like Kalshi and Polymarket is challenging, as these companies do not publish state-specific trading volumes or revenue data, unlike licensed sportsbooks that share monthly handle and revenue statistics.
According to the New Jersey Office of Legislative Services, if this bill becomes law, it is projected to generate between $10.3 million and $15.3 million in tax revenue for the state in a fiscal year.