New Jersey lawmakers are moving forward with legislation that would impose a new 9% surtax on income generated by companies operating prediction markets in the state.
The tax proposal targets a rapidly expanding sector, as the state continues its legal fight over the industry's future. The legislation defines prediction markets broadly, encompassing any physical or electronic system that allows participants to open a speculative position on the outcome of future events, regardless of the mechanisms or structures used.
The bill also adopts an expansive definition of "future events," which includes federal, state, or local elections, events in popular culture, athletic events, games of skill, and legal actions. Rather than separating different types of prediction markets, the legislation would apply the surtax uniformly, with no distinction made between the types of speculative positions.
The tax proposal comes as New Jersey remains involved in an ongoing legal dispute over prediction market operator Kalshi. The state argues that Kalshi's activities are subject to state gaming laws, citing a Nevada ruling that determined the company should be treated as a sportsbook under state regulations.
Ohio has also joined the challenge, citing the Nevada decision in its own efforts to dispute Kalshi's operations. State officials argue that the Commodity Exchange Act does not broadly preempt state regulation of prediction market contracts.
A fiscal estimate prepared by the New Jersey Office of Legislative Services projects the proposed surtax would generate between $10.3 million and $15.3 million in additional state revenue during fiscal year 2027. However, legislative analysts caution that the estimate carries significant uncertainty due to the industry's limited publicly available financial information and its early stage of development.
