New Jersey Set to Become Latest State to Raise Sportsbook Tax

New Jersey may be about to become the third state to raise its sports betting operator tax rate during this legislative session.

According to a report from NJ.com, Governor Phil Murphy and top state lawmakers have agreed to raise the tax rate for online sports betting. Gov. Murphy was initially pushing to increase New Jersey’s rate from 13% to 25% as a part of his budget proposal, but many of his fellow Democrats believed this was too much of a jump. After a meeting between the two sides, it is reported that they have agreed to drop the proposal to 20%.

While New Jersey sportsbooks were preparing for a fight when Gov. Murphy’s original proposal was unveiled, it seems they may be willing to accept a 20% increase, which is around the national average. Given how profitable and operator-friendly the market has been, sportsbooks appear willing to accept the compromised rate. 

The proposed hike would also cover the state’s massive iGaming industry, which is currently taxed at a 15% rate. 

Operators Looking to Stave Off Large Hikes

New Jersey is just the latest market where we have seen operators accept modest tax increases. It shows that the industry is willing to negotiate, and even believes there is room for states to increase their tax revenue. The hope is that other states will see this and choose to pursue more “operator-friendly” tax increases instead of proposing deep cuts into operators' revenues. 

Lawmakers can thank Illinois if they do avoid reprisals from sportsbooks over the increase to 20%. The Land of Lincoln raised its tax rates by switching to a tiered system in 2024, and added a controversial new bet tax just a year later. The Sports Betting Alliance has blasted lawmakers for the move, while FanDuel and DraftKings have announced a new $0.50 surcharge on all bets accepted in the state. 

This puts the market at risk for both the state and operators. Industry leaders hope to prevent this battle from spreading to other markets. A willingness to accept smaller increases could help do that, and save the industry from massive revenue cuts.