New Jersey Governor Vetoes Bill Permitting Sports-Betting Promo Deductions

November 10, 2021
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Days after being re-elected to a second term, New Jersey Governor Phil Murphy has vetoed legislation that would have allowed sportsbook operators to deduct bonuses from their taxable revenues.

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Days after being re-elected to a second term, New Jersey Governor Phil Murphy has vetoed legislation that would have allowed sportsbook operators to deduct bonuses from their taxable revenues.

Legislators in June passed Assembly Bill 4002 as part of a series of tweaks to the state’s gaming law, allowing operators to deduct any promotional gaming credit (PGC) from online sports-betting taxes beyond an annual threshold of $12m, or $8m for land-based betting.

However, Murphy, a Democrat, on Monday sent the bill back to lawmakers with a conditional veto, asking legislators to remove the deduction credit for online betting while keeping the credit for land-based betting.

“I am concerned that the bill’s parallel tax break for online sports wagering undermines the bill’s laudable goal of ushering in a resurgence of visitors to Atlantic City and our racetracks,” Murphy wrote in his veto message.

“Given the record performance of online sports wagering operations and the tenuous connection between online wagering and tourism and local economic growth, I am suggesting revisions to the bill to apply the PGC deduction only to the gross revenue tax on non-internet sports pool operations with the hope that the expansion of PGCs will attract new visitors.”

As things stand, operators of internet gambling and sports betting in New Jersey are entitled to deduct certain promotional credits from taxable revenue only when they exceed an amount of $7.5m per month.

In his veto message, Murphy suggested removing a provision from the bill that required promotional credit to be returned to winning bettors to be eligible for deductions.

“As written, the bill provides that any free bet amounts or promotional wagering amounts qualify for a deduction regardless of any playthrough requirements,” Murphy said. “This provision provides an additional windfall for sports [betting] operators, as they would be permitted to deduct promotional gaming credits that the bettor had little to no chance of winning.”

More than a dozen U.S. states allow for promotional play deductions from sports-betting revenues, subject to varying restrictions. These states include neighboring Pennsylvania, but the Keystone State also has a significantly higher headline 36 percent tax rate than New Jersey’s 9.75 percent tax on land-based betting and 14.25 percent tax on online wagering.

On Monday, Murphy also vetoed Assembly Bill 4297, a bill that would have permitted charitable organizations to offer bingo and raffle games remotely, on grounds that regulating the technology involved with potentially thousands of remote bingo games and raffles would be overly burdensome for regulators.

However, Murphy did sign into law Assembly Bill 637, which expands the types of esports events that can be offered for wagering in the state.

Previously, any domestic competition or international event that featured a player under the age of 18 could not be wagered on, an issue that frequently became an issue in competitive esports where teams often feature players under age 18.

The new law changes the age requirement to permit betting on any esports events where “a majority” of the competitors are 18 years or older.

“Esports have exploded in recent years and we need to allow the casinos and racetracks in New Jersey to participate in this revenue generating business,” said Assemblyman Ronald Dancer, a co-sponsor of the bill.

The new law also clarifies that the operators can accept wagers on “any live competition or talent contest, including awards competitions and competitive eating contests” under the definition of “sports event.”

New Jersey regulators had allowed some wagering on those types of novelty events previously, including the Nathan’s Hot Dog Eating Contest and the Academy Awards, but as a regulatory decision rather than one codified by law.

Bill A 637 further clarifies that New Jersey operators can accept bets only on events specifically approved by the state's Division of Gaming Enforcement (DGE), with a $100 maximum wager and $500 win limit to be applied in the case of any sports events for which the DGE is unable to verify appropriate sporting integrity policies.

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