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New Jersey legislative committees advance bills taxing prediction markets

Legal Writer

Publish Date: Jul 02, 2026

Fact checked by: Matt Moreno

Key Points

New Jersey Assembly and Senate budget committees reported legislation out favorably after inserting identical substitutes
New language imposes 9% surcharge tax on exchanges’ annual revenues from prediction market trading
New Jersey could become third state to levy dedicated tax on prediction market revenue

New Jersey Assembly and Senate committees have simultaneously advanced companion bills that tax prediction market exchanges’ annual revenues from trading activity in the state. Those advancements only happened after the committees inserted substitutes that significantly reduced the rate for that tax and removed other requirements in the original text.

New Jersey is one of several states in a legal dispute with exchange operators, creating the potential for this bill to be invalidated if the state enacts it. Other U.S. states have preceded New Jersey in taxing prediction market revenue, but New Jersey’s approach is novel among them.

New Jersey Assembly, Senate committees substitute bill before recommending

When originally filed, New Jersey A5336/S4447 contained restrictions for prediction market trading, licensing requirements, and an effective tax rate of nearly 30%. After meetings of the Assembly and Senate budget committees, though, the licensing requirements and restrictions on the types of markets that exchanges can offer are no longer part of the legislation.

The tax has been modified to a 9% surcharge on annual revenues as well. Following the insertion of the substitute, the Assembly and Senate committees voted 10-4 and 9-4, respectively, to report the bill out favorably.

The legislation awaits its next committee assignment in both chambers. Should it become law, it would add to the contention between New Jersey officials and operators of prediction market exchanges.

New Jersey taking Kalshi dispute to the highest court in the land

In March, the New Jersey Division of Gaming Enforcement sent cease-and-desist letters to several exchanges including Kalshi. The communications demanded that the recipients stop allowing people in New Jersey to trade sports event contracts on their platforms, as the division considered that activity tantamount to illegal sports wagering under New Jersey law.

Kalshi responded by suing the division and other state officials in federal court, arguing that they had no authority to regulate its exchange and that the demands represented an illegal restraint on their commerce. The trial court granted Kalshi’s request for injunctive relief against enforcement acts in New Jersey, and the U.S. Third Circuit Court of Appeals upheld that decision in April.

The actual trial in that lawsuit is on hold as the defendants asked for a pause while they appeal the ruling on the injunction to the U.S. Supreme Court. If the Supreme Court takes up the appeal, it would represent the first opinion on the legality of sports event contracts on prediction market exchanges and state governments’ ability to regulate exchanges from the country’s highest court.

Should the Supreme Court decide to pass on New Jersey’s petition, then New Jersey would be barred from taking enforcement actions until the trial court can hear Kalshi’s claims on their merits and issue a decision. That could include enforcing A5336/S4447 if the legislation becomes law.

New Jersey isn’t the only place where exchanges face potential assessments. New Jersey is taking a unique path to that end, though.

Two states have already enacted prediction market taxes

Illinois and Kentucky have already levied dedicated taxes on prediction market revenue. The rates in those laws are higher than what A5336/S447 suggests, as Kentucky’s law sets the rate at 14.25% of adjusted revenues and Illinois’ statute assesses a 50% tax on the same.

The bills in New Jersey differ from the laws in Illinois and Kentucky because the New Jersey legislation does not equate prediction market trading with gambling. Illinois’ law also requires exchanges to obtain a new class of license from the state’s gaming regulatory body as the original versions of A5336/S447 did.

Kalshi has sued Illinois to block implementation of the law, following a lawsuit toward a similar end by the U.S. Commodity Futures Trading Commission (CFTC). The CFTC has also sued Kentucky to invalidate its statute affecting exchanges.

Legal action may also effectively block the implementation of A5336/S447 if New Jersey enacts the proposals. The Supreme Court could be the voice affecting that action.

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