Governor Phil Murphy’s 2026 fiscal year budget includes a plan to raise the New Jersey sports betting and New Jersey online casinos tax rate from 13% to 25%, which has caused operators to respond quickly with a PR push against the move.

The potential sports betting and iGaming tax rate hikes are part of Gov. Murphy’s proposal for $1 billion in tax increases across industries, including cigarettes, alcohol, cannabis.

Operators like BetMGM and FanDuel aren’t taking the news kindly, sending out emails to customers urging them to reach out to their state representatives. BetMGM says the tax hike will have a “major” impact on players in the email below, stating it would put “promotional offers and the best odds at risk.”

NJ sports betting and online casino tax rate increase details

New Jersey sports bettors wagered a state record $12.77 billion in 2024, which is saying something for the oldest legal U.S. market outside Nevada. This proposed tax increases would bump both online casinos and online sportsbooks current tax rates higher.

Murphy’s proposed NJ sports betting tax would go from 13% to 25%, while online casinos tax rate would jump from 15% to 25%. This is projected to bring in a $402.4 million increase in revenue annually.

For 2024, New Jersey saw $6.3 billion in total gambling revenue, which reflects a 9% increase year over year compared to 2023. New Jersey online casinos hauled in a record $2.39 billion, up 24% from the previous year.

New Jersey is the birthplace of sports betting legalization (outside of Nevada). It’s the state that sued to get the Professional and Amateur Sports Protection Act (PASPA) invalidated by the U.S. Supreme Court in 2018 – and the first state to offer legal online casinos even prior to that (2013).

Explaining the sports betting and iGaming tax hikes

Gov. Murphy revealed the annual budget on Tuesday, with state spending reaching $58 billion. The proposed tax increases would go largely to support this budget.

In addition to online sports betting and online gambling, Gov. Murphy is aiming to expand the list of “services and transactions” that would be hit with the 6.6% state tax. 2025 has already begun with increases in state gas tax, highway tolls, and mass transit fares.

How tax rate increases could affect players

Sportsbook and iGaming operators are against an increase in taxes. When markets look to increase tax rates on online sports betting or online casinos, operators usually speak out against it as we’ve seen in this case. FanDuel joined BetMGM in reaching out to NJ customers to encourage them to boycott the tax hike.

Increases could lead to things like fewer promotions, higher “juiced” odds at online sportsbooks (-115 instead of the standard -110 odds on spreads and totals, for example), or even an added tax from operators.

In 2024, DraftKings announced plans for an increased tax on winning wagers via a surcharge. This surcharge would affect states that tax more than 20%. At the time, DraftKings CEO Jason Robbins expressed the reasoning as being a direct result of high taxes. DraftKings expressed publicly that higher taxes make it difficult to generate profits.

DraftKings, however, opted to not go forward with the surcharge due to intense public backlash. While the surcharge never managed to go into effect, this is a clear example of how increased taxes would have affected players directly.

If New Jersey does approve an increase in taxes for online gambling and online sports betting, sportsbooks may find a new way to offset their own potential losses.

How other markets may have affected Murphy’s decision

The tax increase would place New Jersey at the higher end of online gambling and sports betting tax rate. However, the success of its neighbors may have played a part in why Murphy views this as a solution.

New York imposes a 51% tax on online sports betting. This is the highest tax rate in the US. New York also stands as the largest online sports betting market in terms of annual revenue. The Empire State, which does not have online casinos, generated $2.1 billion in revenue from online sportsbooks. Comparatively, New Jersey sports betting generated $1.09 billion in revenue.

With both online sportsbooks and online casinos, New Jersey has a steady flow of revenue to pull from. So it is understandable why the Governor would look at this industry as a means of increasing revenue. However, as operators like BetMGM and FanDuel have indicated, a tax hike will likely have an adverse effect on the players.