New Jersey Passes iGaming Tax Increases, Bans Sweepstakes

New Jersey, the state primarily responsible for advancing the iGaming industry in the US, has announced an increase in its online gaming tax rates to 19%. The rate has risen from 13% and 15% for sports betting and online casinos, respectively, but is lower than the 25% rate that Governor Phil Murphy was pushing for. At the same time as the tax rise, the Garden State has also become the latest state to ban sweepstakes casinos.

New Jersey, and Governor Murphy in particular, flew the flag for online gambling when he played a part in having the Professional and Amateur Sports Protection Act struck down. Since then, online betting has exploded in popularity.

As well as betting on traditional sports, bettors can enjoy bets on eSports, such as hero shooter wagers. Overwatch is the most popular hero shooter in the competitive gaming world, according to eSports expert Brett Curtis.

In light of the rise in popularity in the industry, New Jersey Governor Phil Murphy wants to increase the taxes paid by betting companies and online casinos to raise more money for the state. Previously, tax rates in NJ were 13% for sports betting, which includes eSports and event betting, and 15% for online casinos.

Murphy put forward Bill A5447 in February of this year, proposing that the tax on all forms of online gambling should be increased to 25%. The bill has been through several rounds of discussions since then, however, and during this time, a compromise has been reached – one that may appease operators while still increasing the amount added to NJ’s state coffers.

Tax rates will increase to 19% on all forms of regulated online gambling, which means a potential $100m a year of extra income for the state. The revised bill was agreed by a vote of 34-5.

The tax increase mirrors moves taken by other states in recent months, as many look for ways to plug significant holes in state revenue.

Wyoming is set to double its tax rate, while Illinois has not only increased its tax rate to an astronomical 40%, but has also imposed an additional levy on wagers, meaning the first 20,000 bets placed every year will attract a $0.25 per wager levy, paid by the operator. Any additional bets attract double that figure.

As a result of these high rates, DraftKings and FanDuel, two of the biggest operators in the US, announced they would be imposing $0.50 per bet fees on all customers. Both operators are present in New Jersey, which signed an extension to allow online gambling to continue until 2028, although the lower tax rates in the state mean they are unlikely to levy the same charges in The Garden State.

One form of online gambling that won’t be taxed in New Jersey is sweepstakes casino betting, as the state also announced a ban on this type of online casino. Again, this move mirrors action taken by other states. Montana was the first state to introduce such legislation, and other states, including, most recently, California, have followed.