New Jersey Looks To Double Taxes on iGaming

New Jersey Governor Phil Murphy may want to hold off on any trips to Atlantic City anytime soon. His proposal to double taxes on online sports betting from 13% to 25% and internet gambling taxes from 15% to 25% has generated a buzzsaw of media publicity across the state, but nowhere has that cacophony of boos been louder than on the boardwalk.

That’s because in New Jersey, all licensed and regulated online sportsbooks or casinos must partner with an Atlantic City land-based casino to register a “skin.” Each of the city’s nine casinos and the three racetracks across the state can host five of these skins. 

For instance, Borgata's license covers five separate online casinos: Borgata, BetMGM, Wheel of Fortune, Party, and Stardust. Bally’s currently hosts three: Bally Bet, Fanatic Casino, and Monopoly Casino. Each of the 30 online casino operators and 13 sportsbook operators must strike a deal with an established land-based casino or racetrack to be licensed.

While the terms reached between the online operator and the land-based casino are confidential and highly guarded and almost certainly vary between different agreements, the fact remains that most of Atlantic City’s nine casinos see millions, if not tens of millions, in revenue each year simply for hosting up to five of these online casinos. 

In 2024 alone, New Jersey’s sports betting industry generated over a billion dollars in revenue. Even just 5% of that figure means more than $50 million. IGaming did another $2.3 billion, so the amount of money pouring in with no risk and little overhead is a boon for these operators, especially in the tough winter months when all the tourists have packed up and gone home. 

The Governor finds his back up against a wall, well, more of a hole really. A $1.2 billion budget hole, to be precise. His plans to increase tax revenue on iGambling and online sports betting will net the state about $400 million, which isn’t insignificant. Still, that money comes straight from the bottom line of those online casino operators, who, while bearing the brunt of that pain, will also be looking to cut expenses, especially revenue share to legacy land-based operators who are taxed at a much lower rate.

Many, if not most, of the Atlantic City casinos will actually be hit twice since most of them operate online skins of their own. They will see some of the other skin operators asking for concessions while also feeling the pinch of an almost doubled tax rate. 

Sports betting, in particular, was already proving a very tough, low-margin business before the proposed tax raises, with more than half of the original 29 sportsbooks having already closed and several more dangling by a thread. 

Online casinos in NJ have seen a few more operators stick around as margins aren’t as low, but perhaps half again here would have a very hard time keeping their proverbial doors open should they find themselves paying 25% tax. 

Not just Atlantic City politicians but those from around the state have come to the aid of the beleaguered resort town, telling anyone who will listen that these taxes might not just close online casinos but may also force some of the land-based casinos that count on that revenue share from hosting skins to keep the heat on in the winter to close as well. 

Others point out that legal online casinos and sportsbooks, which already struggle to compete with grey market casinos that aren’t licensed and don’t pay taxes in the first place, simply won’t be able to offer the odds that gamblers can find offshore. 

BetMGM has already been reaching out to millions of MGM Rewards players in the Garden State, warning that they could be facing fewer promotions and free play, but the Governor has remained oddly quiet in the face of growing unrest. 

While the Governor seems to believe that this is a quick fix to his budget woes, many Atlantic City casino operators see it as a slow bleed masquerading as a solution. A tax hike of that magnitude won’t just thin out the herd; it might gut the whole system, which already paid in almost $350 million last year.