New Jersey Plans 25% Tax on Online Gambling
Key Takeaways
New Jersey Governor Phil Murphy plans to increase taxes on online gambling and sports betting. The proposal includes raising the tax rate to 25% to fund a record budget of $58.1 billion for the fiscal year 2026. The gambling industry is critical of the plans, fearing negative impacts on land-based casinos in Atlantic City.
Background of the Tax Increase
Murphy’s budget plan includes higher spending on tax relief, healthcare, and reducing a structural deficit of $1.2 billion. In addition to gambling, alcohol, tobacco, and cannabis will also face higher taxes. The tax on recreational cannabis is set to rise from $2.50 to $15 per ounce, while levies on cigarettes and alcohol will increase by 30 cents per unit.
Planned Tax Changes for iGaming and Sports Betting
Currently, online casinos in New Jersey pay 15% of their gross revenue in taxes, while online sports betting is taxed at 13%. Murphy proposes raising this to 25%. In comparison, Pennsylvania imposes a 54% tax on online slots and a 36% tax on sports betting. The government expects additional revenue of $402.4 million from the tax increase for the fiscal year 2026.
Reactions from the Gambling Industry
The Casino Association of New Jersey (CANJ), representing the nine casinos in Atlantic City, opposes the proposed tax increase. According to CANJ President Mark Giannantonio, the changes could negatively impact land-based casinos. Partnerships between online operators and physical casinos currently enable cross-promotions such as free hotel stays and bonus offers that attract visitors to Atlantic City.
Development of the Gambling Market in New Jersey
In 2024, New Jersey’s iGaming sector achieved record revenues of $2.38 billion. Sports betting also reached an all-time high of over $1 billion. However, land-based casino revenues declined by 1.1%, and the number of overnight stays slightly decreased. The average room occupancy in the first three quarters of 2024 was 3.11 million overnight stays, compared to 3.14 million the previous year.
Our Assessment
The proposed tax increase could have significant effects on New Jersey’s gambling industry. While the state expects higher revenues, the measure could reduce the market’s attractiveness for operators. Additionally, there is a risk that players may turn to providers in other states or unregulated platforms. The final decision now rests with lawmakers, who must carefully weigh the economic and regulatory consequences.
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