NJ raises taxes on online gaming revenue

New Jersey’s governor and state legislature have reached a budget deal that includes $1.2B in new taxes to close a deficit, potentially raising costs for online gaming and sports betting.

Under the proposed state budget, taxes levied on online gaming revenue would increase to 20% from 15% while a tax on sports betting revenue would go up to 20% from 13%, a compromise from an earlier proposal of a 25% tax on both. The increase in tax revenue would help cover the budget deficit and boost income for the state’s Casino Revenue Fund, which funds programs for senior citizens and residents with disabilities.

But for gamblers, the higher tax and its impact on online casino’s bottom-line would likely impact betting odds, and result in fewer promotions that could ultimately lead players to black market casinos and online betting platforms.

“A tax hike will have a major impact on your favorite online games, putting promotional offers and the best odds at risk,” FanDuel said in a letter lobbying its members to intervene with their local representative.

And legislators from both sides of the aisle seem to agree.

“Doubling the tax on online sports betting and iGaming is putting a New Jersey success story at significant risk,” said State Senators John Buzichelli (D) and Mike Testa (R).

The tax hike follows similar measures from lawmakers in Illinois, Kansas, Kentucky, Louisiana, Maine, and New York, who have tapped into the lucrative online gambling industry with either higher revenue taxes or transaction fees.

Unwilling to absorb the higher costs due to increased regulation, DraftKings (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT) now charge online gamers in Illinois a 50-cent transaction fee on all online bets, sending a message to lawmakers that consumers will ultimately shoulder the burden of higher taxes.