N.J. lawmakers advance 9% prediction market income tax and election betting ban
New Jersey lawmakers are advancing legislation to impose a 9% surtax on income derived from prediction market operations, with Senate Bill 4447 and Assembly Bill 5336 approved by committee on June 28 and moved to second reading. The scaled-back bills, which also ban election betting and create licensing requirements, target both individuals and business entities generating revenue from prediction market activity. One legislative account said lawmakers delayed final action over litigation concerns.
Kalshi and Polymarket must now model a fourth state tax burden into U.S. expansion plans, with New Jersey's 9% income surtax adding to Illinois's 15% gross receipts levy and Kentucky's enforcement action. The income-based structure matters because it taxes profit rather than turnover, sparing money-losing markets but exposing successful verticals to a persistent state haircut.
Each new state framework weakens the CFTC preemption defense both platforms are litigating in federal court. A New Jersey statute would give states that prefer taxation over outright bans a template to follow, and platforms without dedicated government affairs teams in Trenton will struggle to shape amendments before final passage.
New Jersey joins Illinois and Kentucky in imposing state-level taxes on CFTC-registered prediction market operators, fragmenting the federal preemption argument that Kalshi and Polymarket have pressed in parallel lawsuits across multiple states.