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, as legislators look to tax a rapidly expanding sector while the state continues its legal fight over the industry’s future.
Senate Bill 4447, recently reported from the Senate Budget and Appropriations Committee as a substitute, would apply the additional tax to allocated taxable net income received by prediction market platforms operating in New Jersey. The surtax would be imposed on top of existing taxes, including the Corporation Business Tax. The measure would also apply a matching 9% surtax to income earned by certain partners and shareholders when that income is derived from operating prediction market platforms, in addition to the state’s Gross Income Tax.
The proposal focuses exclusively on prediction markets, which the legislation defines broadly. Under the bill, a prediction market is “any physical or electronic system that allows participants to open a speculative position on the outcome of future events, in a bid-ask format, and in any other form regardless of the mechanisms or structures used for opening speculative positions on future events.”
The bill also adopts an expansive definition of “future events.” Those include “the outcome or occurrence of a federal, state, or local election, events in popular culture, an athletic event or game of skill, any game played with cards, dice, equipment, or any mechanical or electronic device machine, and legal actions.”
Rather than separating different types of prediction markets, the legislation would apply the surtax uniformly. According to the bill, it “does not distinguish the types of speculative positions,” meaning the additional tax would apply to income generated from all qualifying prediction market activity.
New Jersey pairs proposed prediction market tax with continued legal challenge against Kalshi
The tax proposal comes as New Jersey remains involved in an ongoing legal dispute over prediction market operator Kalshi.
According to recent court filings, New Jersey Attorney General Matthew J. Platkin and Deputy Attorney General Liza Fleming urged a federal court to follow a Nevada ruling that determined Kalshi should be subject to state gaming laws. In their filing, the state argued, “As Hendrick confirms, Kalshi’s ‘sports related event contracts’ are ‘sports wagers and everyone who sees them knows it.’” The filing also contended that New Jersey had become “the only court in the country to accept Kalshi’s attempted federalization of the multi-billion dollar gaming industry.”
Ohio has also cited the Nevada decision in its own efforts to challenge Kalshi’s operations. State officials there argued the ruling had been referenced repeatedly in related litigation and disputed the company’s position that the Commodity Exchange Act broadly preempts 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.
Legislative analysts cautioned that the estimate carries significant uncertainty because prediction markets remain a relatively new industry with limited publicly available financial information. The projection also assumes growth in the sector will not reduce activity at existing sportsbooks and casinos. If consumers shift spending away from traditional wagering operators, lower tax collections from those businesses could partially offset revenue generated by the new surtax.
Analysts further noted that forecasting revenue beyond fiscal year 2027 remains difficult because of the industry’s early stage of development. They also said the 2026 FIFA World Cup could temporarily increase prediction market activity, creating revenue levels that may not be sustained in later years.
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