New Jersey lawmakers are forwarding a bill that would institute a 9% tax on gross income generated by platforms offering prediction markets, such as Kalshi and Polymarket.
The bill, S4447, is an updated version of an earlier proposal that did not pass floor votes in the House or Senate before the summer recess. The New Jersey Senate Budget and Appropriations Committee already approved the updated version in a 9-4 vote last week.
New Jersey wants prediction market tax
According to the terms of the bill, New Jersey regulators would be entitled to 9% of the gross proceeds generated by prediction platforms’ fees, commissions, and market revenue, as opposed to the total trading volume. The bill’s primary goal is to create more funding for the state.
“We’re planning on looking at that over the summer and into the fall,” Assembly Speaker Craig Coughlin (D-Middlesex) told the New Jersey Monitor. “I think there’s every chance we’ll pass something out. We’ll make sure it’s right.”
The previous version of the bill — which aimed to implement a 10% surcharge on nearly all contracts — had made progress in Congress prior to the June 30 deadline. However, an amended version presented by state Democrats stopped the bill’s progress.
“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.
Hoping to generate more funding
New Jersey’s near-$7 billion commercial gaming revenue total was the third-largest of any state in 2025, according to Statista. Although prediction operators maintain they do not represent gambling, their potential revenue generation is reminiscent of gambling operators.
If prediction markets were treated like sports betting odds, operators would be required to pay a 19.75% tax on their gross gaming revenue.
Although the 9% figure is less than half of what sportsbooks have to pay, it is more than the current non-existent payment standard. The Office of Legislative Services said in a fiscal note that the tax could generate $10.3-15.3 million in FY2026, although it did not supply estimates for future years.
With those potential gains in sight of state officials, a spokesperson for Polymarket said that attempting to tax prediction markets would prompt a lawsuit from the federally-regulated company or its regulator, the Commodity Futures Trading Commission (CFTC).
“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,” said Olivia Chalos, Polymarket’s deputy chief legal officer.
Differences between sports betting and prediction markets
New Jersey gaming customers are fond of sports betting. They wagered $12.2 billion on various events in 2025, leading to $1.2 billion in revenue, an 8.2% year-over-year increase. Over 95% of all sports bets were also placed online as opposed to at in-person casinos.
Sports event contracts are similar to sports betting in that users risk money and either win or lose a given amount based on the outcome of an event. The primary difference is that sportsbooks use house-made odds, whereas prediction markets pit users against one another in a peer-to-peer format.
Prediction markets also do not impose a vig and take a smaller percentage of payouts than sportsbooks, usually in the form of transaction or withdrawal fees.
The Trade Handle Prediction Markets Take
As I noted in previous articles, the growing confidence of state officials has emboldened other state regulators to fight back against the spread of prediction markets. Adding a variety of fees and taxes, if not implementing outright bans, has escalated the back-and-forth between prediction markets and local lawmakers. The CFTC has been increasingly involved in defending licensed operators, and although it was largely successful in doing so, the tension is increasing.