Key Takeaways
- Legislative committees in New Jersey approved matching bills imposing a 9% surtax on prediction market platform revenues.
- The Senate committee voted 9-4 while the Assembly committee voted 10-4, advancing the measures to second reading.
- Lawmakers scrapped the initial proposal featuring a 29.75% tax and mandatory state licensing requirements.
- Revenue projections estimate the surtax will generate between $10.3 million and $15.3 million during fiscal 2027.
- Meanwhile, New Jersey’s Attorney General seeks additional time to file a Supreme Court petition challenging a pro-Kalshi federal court decision.
Legislators in New Jersey made significant progress this week on taxing prediction market companies. Two key committees gave their approval on June 28 to parallel bills targeting these platforms.
The Senate Budget and Appropriations Committee greenlit Senate Bill 4447, while the Assembly Budget Committee approved the companion measure, Assembly Bill 5336.
Both bills underwent committee substitutions prior to passage, meaning lawmakers modified the language before voting. The Senate approved the measure 9-4, with the Assembly following suit at 10-4.
Each bill now advances to second reading in its respective chamber—the required procedural step before reaching the full floor for final consideration.
The legislation establishes a 9% surtax on the gross income prediction market operators generate annually. This levy would function as an additional charge beyond New Jersey’s standard corporate and income tax obligations.
Senate Budget Chairman Paul Sarlo characterized the legislation as an initial move toward industry oversight. His stated objective is aligning these platforms with the regulatory framework already governing sportsbooks throughout the state.
The Office of Legislative Services projects the tax will deliver between $10.3 million and $15.3 million to state coffers during the 2027 fiscal year.
Significant Retreat From Initial Proposal
The bills that cleared committee approval this week bear little resemblance to their original incarnations. Legislators stripped away the majority of stringent regulatory provisions contained in the first drafts.
The initial versions classified sports event contracts as sports betting activities. They mandated a comprehensive licensing framework administered by the Division of Gaming Enforcement.
That preliminary draft featured a substantially higher 29.75% tax rate. This figure represented a combination of New Jersey’s current 19.75% sportsbook levy plus an additional 10% surcharge.
Platforms would have required state authorization to legally provide contracts. Operating without proper licensure could have resulted in criminal prosecution under the original framework.
The Attorney General would have possessed authority to pursue injunctions against non-compliant operators. Penalties under that version could have escalated to $1 million daily.
The initial draft also included prohibitions on contracts involving fatalities, catastrophes, or electoral outcomes. The current version eliminates all these provisions, retaining only the streamlined 9% surtax without licensing mandates or content restrictions.
Supreme Court Battle Looms for Garden State
New Jersey’s efforts extend beyond taxation. State officials are contemplating a Supreme Court appeal concerning prediction market regulation.
The Attorney General’s office submitted documents requesting an extension to file its petition. The revised submission deadline now stands at September 4.
This development stems from an April decision by the U.S. 3rd Circuit Court of Appeals. That tribunal rejected New Jersey’s attempt to force Kalshi and comparable platforms to cease operations.
The appellate court determined that sports prediction contracts fall within the purview of the Commodity Exchange Act. This federal statute assigns regulatory authority to the Commodity Futures Trading Commission rather than state governments.
Solicitor General Jeremy Feigenbaum contended the ruling has far-reaching implications for state regulatory power. He asserted it would exempt a multibillion-dollar sports wagering sector from state jurisdiction entirely.
New Jersey gaming authorities previously issued cease-and-desist orders to Kalshi and Robinhood in March 2025. Those directives alleged the platforms were facilitating unlawful sports wagering under state statutes.
Following the appellate court’s decision against New Jersey, the Supreme Court represents the state’s remaining avenue for challenging the ruling.
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