Chavdar Vasilev is a gambling news writer with several years of experience in the iGaming industry. He started creating promotional content but soon found he loved reporting on the industry itself. Since then, he’s delivered...
Read Full BioNew Jersey will be the latest state to raise online gambling taxes, but it won’t be as high as Governor Phil Murphy had proposed.
Earlier this year, Murphy proposed to raise the tax to 25% for online sportsbooks and casinos. Currently, the rates are 13% for mobile sportsbooks and 15% for online casinos.
The governor estimated the hike would generate over $400 million in additional revenue.
As expected, operators opposed the hike. They claimed it would require them to reduce promos, which could drive consumers to illegal platforms.
While not officially confirmed, The Press of Atlantic City reports that lawmakers agreed on a 19.75% rate on Monday, aiming to satisfy the government and operators’ requests.
The legislature must pass the 2026 budget by July 1, marking the start of the new fiscal year.
Balance Between Record Revenues and Fairness to Operators
Last week, Gov. Murphy told The Press of Atlantic City that the state was seeking a balance between increasing online gambling revenue and fairness to the industry and its customers.
“We want to be competitive. We want to be fair to our taxpayers, and we want to be fair to those who participate in the industry.”
He emphasized that New Jersey paved the way for legal sports betting in the US. He added that the state wants to further the progress.
New Jersey stands in the middle among US states regarding its sports betting and online casino taxes.
There have been talks about raising it, including a bill last year. That proposal by Sen. John McKeon would’ve increased the tax to 30%. While his bill failed, McKeon predicted that a hike is inevitable.
Now that it seems like it will become a reality. The new tax comes at a time when the online gambling industry is thriving in New Jersey.
In May, the state’s total gambling revenue was $614.7 million. Online casinos reported a 28.5% increase compared to May 2024, while sports betting saw a 30.2% growth year-over-year.
Additionally, land-based casinos had a strong performance, reporting a 10.9% yearly increase.
Truist: Substantial Increase, but Manageable
Analysts from Truist Securities believe the cost increase for operators will be manageable, especially considering tax rates in states like New York and New Hampshire, where the rate is 51%. Also, the increase is much lower than in Illinois.
Truist suggests that the increase could be mitigated through reductions in promotions alone. It added that a 50% mitigation in 2026 is “very reasonable and potentially higher afterwards.”
Truist also conducted a “back-of-the-envelope” analysis based on the latest twelve-month data to estimate the added financial burden for leading operators under the new tax rates, based on a 20% tax:
- FanDuel: Total impact of $67 million ($29 million in sports betting and $38 million in iGaming)
- DraftKings: Total impact of $56 million, ($20 million in sports betting and $36 million in iGaming)
- BetMGM: Total impact of $27 million ($5 million from sports betting and $22 million from iGaming)
- Caesars: Total impact of $18 million ($3 million in sports betting, $15 million in iGaming)
- Penn: Total impact of $4 million ($2 million from both sports betting and iGaming)
Operators Could Use Illinois Playbook to Offset NJ Tax Impact
While Truist estimates that the gross tax impact could cost FanDuel $67 million and DraftKings $56 million annually, the firm provided another outlook.
Truist estimates the new tax would reduce Flutter Entertainment’s 2025 adjusted EBITDA guidance by $35 million. For DraftKings, that number would be $30 million—figures that reflect expected mitigation efforts already built into the operator’s strategy.
This implies that the two operators might be able to mitigate over 40% of the added cost. That could be done through promotion reductions or operational changes.
Though it’s unclear whether New Jersey operators will follow suit, Illinois offers a recent example of how companies may respond to higher taxes.
Both FanDuel and DraftKings recently implemented a 50-cent surcharge in Illinois after the state voted to raise taxes for a second year straight. In 2024, the tax on gross gaming revenue jumped from 15% to 40%.
Then, about a month ago, lawmakers voted to add a tax on every bet in the state. Some estimates suggest that with the new tax, the effective rate in Illinois is close to 50% for the two gaming giants.
FanDuel acted first and announced the surcharge. It stated that it must pass on the costs to the consumers to protect margins. DraftKings followed suit shortly after. Investors reacted positively to both companies’ moves, suggesting they see that as a good strategic move.
As the New Jersey hike is expected to be less than 10% for both sports betting and online casinos, it’s unlikely that the operators will follow Illinois’ example.
