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New Jersey lawmakers are expected to revisit a proposal to tax prediction markets when the legislature returns in the fall after the measure failed to reach floor votes before the summer recess.
The legislation would impose a 9% surtax on prediction markets’ net income in an effort to raise additional revenue for the state. The bills had cleared budget committees in both legislative chambers on party-line votes before stalling.
Assembly Speaker Craig Coughlin, the bill’s prime sponsor in the Assembly, said lawmakers will continue reviewing the proposal over the summer after amendments adopted in the Senate raised concerns about its scope.
“We’re planning on looking at that over the summer and into the fall. I think there’s every chance we’ll pass something out. We’ll make sure it’s right,” Coughlin said.
He said the revised Senate language prompted concerns that the legislation could inadvertently affect markets beyond prediction markets.
“There was some notion that we might be affecting other things, like the stock market or something like that. Clearly that was never the intent,” Coughlin said.
An earlier version of the proposal would have imposed a 10% surcharge on nearly all prediction market contracts, while sports-related contracts would also have been subject to New Jersey’s 19.75% internet sports betting tax.
The proposal comes as prediction market operators, including Kalshi and Polymarket, continue to face legal scrutiny over sports-related contracts. In April, a divided panel of the U.S. 3rd Circuit Court of Appeals ruled that Kalshi’s sports wagering contracts are futures trades regulated exclusively by the Commodity Futures Trading Commission.
Polymarket warned that state efforts to regulate prediction markets could face legal challenges under federal law.
“Polymarket operates as a CFTC-regulated designated contract market under the exclusive jurisdiction of the Commodity Exchange Act, and state-level efforts to regulate prediction markets will likely face significant federal preemption challenges,” Olivia Chalos, Polymarket’s deputy chief legal officer, said.
The New Jersey Office of Legislative Services estimated the proposed surtax could generate between $10.3 million and $15.3 million during the current fiscal year but cautioned that future revenue remains uncertain because prediction markets are still a relatively new industry.
The analysis also noted that the 2026 FIFA World Cup could temporarily boost activity while warning that prediction markets could reduce revenue from casinos and sportsbooks, affecting existing state tax collections.
The proposal has drawn opposition from UNITE HERE Local 54, which represents casino workers in Atlantic City. The union argues that prediction markets threaten casino employment, allow participation by 18-year-olds despite New Jersey’s legal gambling age of 21, and that taxing the platforms could lend them legitimacy.
“If the state taxes prediction markets, it appears to legitimize them. Jobs in New Jersey have been lost and will continue to be lost as a result of this,” Donna DeCaprio, President of UNITE HERE Local 54, said.
“We understand the sponsors are trying to level the playing field and generate tax revenue, but prediction markets are an existential threat to our jobs. This bill is not the solution,” she added.