DraftKings, FanDuel to Bear Brunt of New Jersey Online Betting Tax Hikes
If New Jersey approves the suggested tax increases on iGaming and sports betting, DraftKings and FanDuel, the two biggest online sportsbook operators in the US, would suffer the most.
In a recent report, Eilers & Krejcik Gaming (EKG) projected that the two companies would experience a total tax increase of $126 million this year if the Garden State moves forward with raising internet gaming taxes. Last month, Governor Phil Murphy (D) suggested raising the state’s tax on iGaming income from 15% to 25% and almost doubling the tax on online sports betting from 13% to 25%. Those proposals haven't been enacted into law, but if that occurs, DraftKings and FanDuel would see the most significant boosts.
A chart of New Jersey’s online gaming taxes and how those rates could change if increases are approved. (Image: Eilers & Krejcik Gaming)
According to New Jersey's existing online gaming tax rates, DraftKings and FanDuel are projected to owe approximately $180.7 million and $186.1 million, respectively, in taxes this year. However, should the state authorize the tax increases, those amounts would rise to $242.2 million and $250.5 million, respectively, per EKG.
A Bit of Flexibility Regarding New Jersey Tax Hikes
Politicians in New Jersey have introduced Assembly Bill 5349 and Senate Bill 5349 — legislation aimed at promoting Murphy’s gaming tax initiative. Nonetheless, the passage is not fixed, and agreements can be reached.
"New Jersey’s track record of nuanced and broadly industry-friendly policy choices leads us to believe there is scope to lower the online sports betting rate, possibly closer to the national average of 20%,” observes EKG.
As expected, operators are not keen on Murphy's proposal. BetMGM and FanDuel have urged customers to reach out to their state representatives to express concerns regarding the tax strategy, yet the governor’s plan is relatively small compared to what has been observed in other states.
“We still think some kind of tax increase is likely given the proposal is (1) fairly moderate (~27% blended GGR rate), (2) backed by Governor Murphy, (3) slated for inclusion in the budget, a must-pass bill, and (4) made amidst exigent fiscal need (the state is facing a $3.8 billion budget deficit),” notes EKG.
Additional Contenders for 2025 Sports Wagering Tax Hikes
New Jersey has consistently been seen as a sensible option to raise internet betting taxes, making Murphy’s proposal predictable to those in the industry. The previously mentioned budget shortfall only intensifies the necessity for the state to explore new sources of income.
Apart from New Jersey, other states, including another one in the Mid-Atlantic area, may increase taxes on online sports betting. Maryland is generally viewed as a top candidate to accomplish this. Gov. Wes Moore’s (D) budget for 2025 suggests increasing the state’s tax on mobile sports betting from 15% to 30%.
In contrast to New Jersey, Maryland does not allow iGaming, so there is no tax on that activity; however, Moore's budget proposes raising the tax on table game winnings at the state's terrestrial casinos from 20% to 25%.
