New Jersey Senators introduce bill aiming to regulate prediction markets at state level

New Jersey Senators Nicholas Scutari and Paul Sarlo have introduced legislation which aims to regulate prediction market operators at a state level, following rulings which found Kalshi’s sports event contracts to fall under the authority of the Commodity Futures Trading Commission (CFTC) and Commodity Exchange Act (CEA). 

Senate Bill 4447 states: “Because these prediction markets are registered and operate under the Commodity Exchange Act, they assert that they need not comply with state law.

“As a result, prediction markets are able to offer wagers without the approval of the appropriate gaming authorities, and offer wagers to persons under the age to legally wager in this state, pay lower tax rates than the operators who offer the exact same wagers but who have received proper licensure to do so and avoid the reporting and compliance requirements provided by state law.”

The legislation would also appoint the New Jersey Division of Gaming Enforcement (DGE) as the lone regulator of prediction market activity, as well as prohibit event contracts related to death, terrorism and politics. 

Violators of such measures would be subject to a $10,000 fine, 18 months of confinement or both. SB 4447 states “each of these markets violate or encourage the violation of longstanding state policies that protect the health, safety and welfare of the state’s citizens.”

Operators seeking licensing in New Jersey would be required to introduce responsible gambling measures such as age and identity verification, deposit limits, problem gambling helplines and self-exclusion tools. 

Event contracts related to sports are set to be regulated “in a similar manner as sports wagering” in New Jersey, while SB 4447 also proposes implementing a minimum age limit of 21 years old prior to trading. 

Under the legislation, general event contracts would be subject to a 10% surcharge on revenue, sports event contracts are taxed at the same 19.75% rate as sports betting and an additional 10% surcharge on sports contract trading would be implemented. 

A New Jersey appellate court previously ruled in a 2-1 vote that the DGE does not have the authority to prohibit Kalshi from offering sports event contracts in the state. 

Also on June 17, organizations such as the American Gaming Association, Indian Gaming Association and Association of Gaming Equipment Manufacturers penned a letter to US Senators in hopes of banning event contracts tied to sports and casino-style gaming.

Such language would be included within legislation tied to crypto market structures, with the request stating each organization is “united in our concern that prediction markets have fueled the largest expansion of gambling in US history over the past 18 months.”