New Jersey Governor Phil Murphy submits a new budget proposal that seeks to increase state tax revenue on sports betting as well as online casinos to 25%. Currently, the sports betting revenue is charged at only 13%, and online casino revenue is taxed at just 15%.

New Jersey Governor Phil Murphy has included the state of New Jersey to the growing list of US states considering an increase in sports betting and online casino tax rates. On Tuesday, Murphy introduced his proposed budget for the 2026 fiscal year, which includes a substantial tax hike for New Jersey's sports betting and online casino industries.

Under the proposed budget, the tax rate on sports betting revenue would increase from 13% to 25%, while the tax on online casino revenue would rise from 15% to 25%. If passed, this move would significantly impact the industry's financial outlook in the state.

Election-year challenges may stall tax increase

Despite the proposal, industry experts believe the tax hike is unlikely to pass in its current form. A source familiar with the legislative process said that New Jersey lawmakers, particularly in an election year, are hesitant to raise taxes on a thriving industry.

"New Jersey is unique in this space, because of the deep history with the casino industry, we birthed PASPA, we feel protective, and this is an industry that's done well by us and done well by them," stated the source. "People get what that means. People are focused that this will end up somewhere around the same place, maybe a little higher, but keeps us in a competitive tax rate."

The state has a long-standing relationship with the gambling industry, and lawmakers are aware of its contributions to the economy. Many believe that a compromise will be reached to maintain New Jersey's competitive edge in the market.

NJ budget breakdown

The Summary of Budget Recommendations for Fiscal Year 2026 outlines expenditures exceeding a whopping $58 billion, with a surplus of $6.3 billion. A portion of the additional revenue generated by the proposed tax increases – a total of $402.4 million - would be allocated as follows:

  • $322.6 million to the Casino Revenue Fund
  • $80 million to the General Fund

In addition, lawmakers face a 30th of June deadline to finalize and authorize the budget.

Bipartisan opposition to tax hike

The proposed tax increase has already faced bipartisan pushback from legislators. Senators Michael Testa and John Burzichelli issued a joint statement expressing concerns about the potential negative impact on the industry.

"Simply put, doubling the tax on online sports betting and iGaming is putting a New Jersey success story at significant risk," the senators said.

Lawmakers are also mindful of the sports betting industry's role in generating tech-sector and financial jobs, particularly in northern New Jersey. The proposal's reception among legislators suggests that significant revisions may be necessary before any tax hike is approved.

Potential impact on the sector

A Truist Securities report highlights concerns that the tax hike could have a negative effect on gaming stocks. However, the analysis also noted that the proposed increase was lower than expected, given New York's significantly higher 51% tax rate on sports betting revenue.

The report also suggests that New Jersey's move could set a precedent for other states considering similar tax increases. Among the key takeaways from the analysis:

Higher tax rates could help offset budget deficits, potentially accelerating online casino legalization in other states.

Market leaders like DraftKings and FanDuel are better positioned to absorb the tax hikes compared to smaller operators.

A growing trend in sports betting tax increases

New Jersey is not alone in seeking higher tax revenue from sports betting. Other states have also proposed similar increases:

Ohio: Governor Mike DeWine has proposed doubling the state's sports betting tax rate from 20% to 40%. This follows a previous increase from 10% to 20% in 2023.

Maryland: Governor Wes Moore has introduced a plan to raise the tax rate from 15% to 30%.

Illinois: In 2023, the state moved from a flat 15% rate to a tiered system, with taxes reaching as high as 40%.

While New Jersey's proposed tax hike is lower than some of these other states, it remains a contentious issue within the state's legislative chambers. Whether the proposal will pass as currently structured remains uncertain, but industry experts anticipate a more moderate increase to maintain New Jersey's competitive position in the gambling market.