New Jersey Looks Likely to Increase iGaming Taxes

New Jersey appears likely to be the first state to increase iGaming taxes so far this year, with the new taxes taking effect on July 1. While broadly seen as a compromise from the governor's original proposal of 25%, it is still strongly opposed by both casino and sportsbook operators throughout the Garden State. 

The tax rate on iGaming has been 15% since the state began iGaming in 2013. The new tax rate will be 19.75%, applicable to both casino and online sports betting. The online sports betting tax rate has been set at 13% since its inception in 2018. 

While an additional 4.75% may not seem like much, it's a 31% hike from the previous rate, and it's even worse for sportsbooks, which are staring down a 51% tax hike. With online sports betting generating more than $138 million last year and online casinos adding another $360 million, this new tax plan is expected to bring in an additional $200 million in revenue. 

However, it's probably worth noting that the New Jersey budget for fiscal 2026 is north of $58 billion, and the current estimates are for about a $1.2 billion deficit. It's likely that both Governor Phil Murphy and, to a somewhat lesser extent, the New Jersey legislators were emboldened by yet another banner year for both online casinos and sportsbooks. 

In May alone, NJ online casino operators posted a record-breaking $247 million, up more than 29% from a year earlier, while NJ online sportsbooks combined for an additional $102 million, up more than 30% from last May. Seeing 20% to 30% year-over-year growth, month after month, while staring down a potential budget deficit has no doubt left the political class sharpening their knives.

But increased tax rates of more than 50% in the case of sports betting will come at a cost somewhere, whether that is marketing, player reinvestment (free play and comps), or simply not pouring some of those profits back into the technology that runs this several-billion-dollar-a-year business. And all of those choices have consequences for the continued growth of the industry. 

Other states, like Illinois, Maryland, and Louisiana, have also chosen to increase tax rates this fiscal year, with Ohio and Wyoming still undecided on the issue.

Meanwhile, New Jersey online operators will immediately insist that the sky is falling and that every one of their players will seek an untaxed and unlicensed offshore casino or sportsbook solution if they have to dial back even slightly on player offers or invest in their tech stacks.

At some point, players will chase better lines, bonuses, and comp offers from grey market operators with no tax burden. The only question is whether that time has come.

Governor Murphy and some legislators in Trenton appear ready and willing to take that bet. Whether it will result in continued double-digit increases in online gaming revenue in the year ahead or a sharp pullback as operators cut offers and innovation remains to be seen.