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New Jersey Governor Phil Murphy has continued the trend of U.S. governors proposing significant tax hikes for online gambling by calling for a 25 percent proposed state tax rate for both mobile sports betting and online gaming.
Murphy proposed the increase as part of his executive budget proposal, which was unveiled Tuesday afternoon (February 25).
The state’s online operators currently pay a state tax rate of 13 percent on online sports betting and a 15 percent tax on online casino, and according to a budget briefing book provided by Murphy’s administration, the increases would generate more than $402m in new tax revenue.
Some $322m of that increase would come from the online casino side, while $80m would come from the sports wagering tax increase.
New Jersey operators also pay further investment taxes of 1.25 percent for sports and 2.5 percent for iGaming, meaning the new effective tax rates under Murphy's budget proposal would be 26.25 percent and 27.5 percent of gross revenue, respectively.
Murphy, who is in the final year of his second term as governor, did not comment specifically on the tax increase during a budget address before the General Assembly on Tuesday.
One source familiar with the New Jersey political landscape was skeptical that the increase as proposed would pass muster with state lawmakers who are similarly facing re-election this year. Murphy's budget proposal kickstarts a wider legislative process that will involve a series of hearings by the New Jersey Senate and Assembly, with a final state budget law due to be enacted prior to the start of the new fiscal year on July 1.
Online gaming trade group iDEA was also critical of the proposal, particularly as unregulated competition continues to emerge for licensed sports-betting and iGaming operators.
“New Jersey’s legal online gaming and sports betting industry has been a national success story, generating billions in economic activity, supporting thousands of jobs, enacting regulation that protects consumers, and delivering significant tax revenue for the state,” said Jeff Ifrah, iDEA co-founder and general counsel, in a statement. “It is baffling why the governor would seek to undermine this by imposing even more taxes on an industry that is already exceeding its economic promise.”
"Raising taxes only makes New Jersey’s market less competitive, driving players toward platforms that aren’t regulated and that the state can’t benefit from,” Ifrah added. “Instead of undermining a proven model, policymakers should recommit to strengthening the legal market that has made New Jersey a leader in the U.S.”
The move by Murphy comes amid even more drastic increases proposed in executive budgets by Maryland Governor Wes Moore and Ohio Governor Mike DeWine to double their respective state’s sports-betting tax rates, up from 15 percent to 30 percent in Maryland and 20 percent to 40 percent in Ohio.
Ohio already raised its tax rate from 10 to 20 percent in 2023, and Illinois followed suit in 2024 with an increase from 15 percent to a graduated state tax of 20 to 40 percent of revenues.
New Jersey is also an outlier among its neighboring states, with its 14.25 percent effective tax rate on sports betting trailing the 51 percent collected by New York, as well as the 36 percent collected by Pennsylvania, although the Keystone State permits unlimited deductions of promotional credits that reduce the effective rate materially.
The Garden State is one of the U.S. online market’s major success stories, with the state spearheading the charge to legalize sports betting through the federal lawsuit that ultimately led to the overturning of the Professional and Amateur Sports Protection Act.
New Jersey's subsequent launch of legal sports wagering in 2018 has since generated over $4bn in sports-betting revenue to date, with the state the third largest market in the U.S. last year after only New York and Illinois.
Its online casino success, which has generated more than $9bn in revenue since 2018, has also been a model that industry leaders have looked to promote in other states as they lobby for gaming expansion, pointing out how online casino gaming helped stabilize the Atlantic City casino industry during the coronavirus pandemic and has grown the state’s overall gaming pie.
That growth was evidenced when, in October, monthly online casino revenues topped land-based casino revenues for the first time in the post-pandemic era.
In 2024, online casino and sports-betting revenues accounted for 55 percent of casino-based gaming revenues in New Jersey, up from 23 percent in 2019 and 47 percent in 2022.
