New Jersey lawmakers agree on compromise 19.75% tax rate on online gambling and sports betting

New Jersey lawmakers have agreed to raise the tax rate on online gambling and sports betting to 19.75%, a compromise from the 25% initially proposed by Governor Phil Murphy in his February budget.

The new rate increases the current 13% tax on online sports betting and 15% on internet casino games, and will be included in the state’s budget that must be passed by July 1.

The revised rate was confirmed by five lawmakers and industry officials to The Press of Atlantic City under the condition of anonymity, citing restrictions on discussing budget negotiations publicly.

Balancing State revenue and industry viability

Governor Murphy said the state aimed to strike a balance between generating new revenue and supporting a competitive gambling market. “We want to be competitive,” Murphy said in an interview earlier this month. “We want to be fair to our taxpayers, and we want to be fair to those who participate in the industry.”

Murphy also cited New Jersey’s role in the legalization of sports betting across the US. The state was responsible for bringing the case that struck down the Professional and Amateur Sports Protection Act, more commonly known as PASPA, to the Supreme Court in 2018. That move opened the doors for states to decide on the legalization of sports betting.

“We're proud of the progress that we've made since we established ourselves back in 2018, and we want to further that progress," Murphy added. "We want to do it in a way that works, that's balanced for the participants, that works for the state, and works for our taxpayers.”

Industry opposition to higher rates

While the Casino Association of New Jersey did not issue a statement on the revised rate, its president, Mark Giannantonio, previously criticized the 25% proposal.

“As evidenced in other jurisdictions, this type of tax hike will not yield such expected tax dollars to the state treasury because it will result in diminishing returns through a consumer shift away from the licensed and regulated providers and back to the unregulated and illegal, offshore online businesses from which the state derives no revenue,” he said at the time.

Online sports betting generated $138.3 million in tax revenue for New Jersey in 2024, while internet gambling added $358.3 million. The state had projected that a 25% rate would generate $402.4 million. Under the lower 19.75% rate, the expected revenue will be reduced, though the exact amount has not been specified.

The tax increase contributes to the state’s proposed $58 billion budget, with lawmakers turning to gambling-related revenues as a funding source.

Other States enact similar measures

New Jersey’s move aligns with several other states that are also increasing online gambling taxes. Maryland will raise its online sports betting tax from 15% to 20% starting July 1, while Massachusetts is considering an increase from 20% to 51%. 

Illinois implemented a tiered system last year, with rates up to 40%, compared to its previous flat rate of 15%. That change led operators like FanDuel and DraftKings to add a $0.50 surcharge per wager.

Ohio doubled its sports betting tax from 10% to 20% in 2023 and is considering raising it to 40%. Louisiana is moving from 15% to 21.5%, while North Carolina is weighing an increase to 36%.

A June 16 investor note from Fitch Ratings warned that rising state tax rates could impact operator profitability. “Recent and proposed state sports betting tax hikes could dampen the online gaming sector’s positive growth momentum,” said David Lowenstein, associate director at Fitch.

Industry observers continue to watch how operators respond to tax changes, especially in high-tax jurisdictions, and whether additional customer fees will be introduced as a result.