New Jersey budget committees approve legislation to tax prediction markets

Two New Jersey budget committees have approved Senate Bill 4447 and Assembly Bill 5336, which could result in the implementation of a 9% surtax on the gross income generated by prediction market operators during a tax year. 

Both pieces of legislation have been revised from their original proposals, however, which looked to ban prediction markets related to death, disasters, political elections and public officials trading on respective platforms. 

The initial versions would have also required operators to gain licensing from the New Jersey Division of Gaming Enforcement, as well as pay the state’s 19.75% tax on sportsbooks and an additional 10% surcharge. 

Instead, the only language related to prediction markets within SB 4447 and AB 5336 covers the new 9% surtax, which would be in addition to any other taxes which must be paid under the New Jersey Gross Income Tax Act. 

The Senate Budget and Appropriations Committee approved SB 4447 and AB 5336 with a 9-4 vote, while the Assembly Budget Committee passed both pieces of legislation following a 10-4 count. 

Operators also would have been subject to responsible gambling standards, while any entities offering sports event contracts without a license may have faced criminal charges from the New Jersey Attorney General’s Office. 

On June 29, US senators John Curtis and Adam Schiff called for a federal investigation into Polymarket after The Wall Street Journal reported that the prediction-market operator paid creators to promote staged betting content.

In a letter to CFTC Chairman Michael Selig, the senators said the allegations were “deeply troubling and demand immediate scrutiny.”

The WSJ reported that Polymarket-backed promotional videos showed fake trades on replica websites, with some clips presenting staged wins as real outcomes. The report said it reviewed more than 1,100 videos and found widespread use of simulated bets.