New Jersey lawmakers are taking a major step toward regulating the growing prediction market industry. In late June 2026, state legislators advanced a set of bills that would impose new taxes and restrictions on these platforms.
A prediction market is a platform where users trade contracts based on the outcome of future events. These events can include sports results, political elections, or even economic indicators. If a user predicts correctly, they can profit from their position.
Popular platforms like Kalshi and Polymarket have brought prediction markets into the spotlight. While they describe their products as financial tools, many regulators see them as similar to sports betting.
New Jersey’s Proposed Prediction Market Tax
One of the biggest developments is a proposed 9% tax on income generated from prediction market operations. This tax would apply through existing structures like the Corporation Business Tax or Gross Income Tax.
Lawmakers say the goal is to create fairness between prediction market operators and licensed sportsbooks. Traditional betting platforms in New Jersey already face strict rules and taxes, and officials want to “even up the territory.”
According to the state’s Office of Legislative Services, the tax could generate between $10.3 million and $15.3 million in revenue for fiscal year 2027.
Key Bills Shaping the Market
Several bills are moving through the New Jersey legislature, each aiming to define how prediction markets should operate.
One major proposal, S3692/A4689, would:
- Ban certain types of markets, including those tied to death, catastrophic events, and political elections
- Allow regulated “athletic event markets” such as sports and horse racing
- Require users to be at least 21 years old
- Include responsible gaming tools like self-exclusion programs
- Require licensing and partnerships with existing sportsbook operators
- Apply taxes similar to online sports betting
Another bill, S4447, introduced by Senator Nicholas Scutari, includes a similar framework. Some versions also mention a potential 10% surcharge and stricter oversight rules.
Together, these bills show that New Jersey is not just looking to tax prediction markets, but also reshape how they operate.
The Federal vs. State Legal Battle
A key issue in this debate is who actually controls prediction markets: state regulators or the federal government.
Under the Commodity Exchange Act, the Commodity Futures Trading Commission (CFTC) has authority over certain financial products, including event-based contracts traded on approved exchanges. Platforms like Kalshi argue that their markets fall under this federal oversight.
In April 2026, the U.S. Court of Appeals for the Third Circuit ruled in favor of Kalshi. The court found that the CFTC has exclusive jurisdiction over its sports-related event contracts. This decision blocked New Jersey from applying its gambling laws to the platform.
This ruling creates a direct conflict. While New Jersey wants to tax and regulate prediction markets, federal law may limit how far the state can go.
Why States Are Pushing Back
New Jersey is not alone in its concerns. Several states are looking at prediction markets as a growing threat to regulated gambling industries.
Key concerns include:
- Unfair competition with licensed sportsbooks and casinos
- Risks of insider trading or market manipulation
- Lack of consumer protections compared to regulated betting
- Potential loss of tax revenue from traditional gaming
Labor groups and industry stakeholders have also raised concerns. Some argue that expanding prediction markets could harm jobs tied to casinos and sportsbooks. The effort shows how states are trying to keep pace with fast-moving digital markets that look a lot like gambling.
What Happens Next on the Prediction Market Front?
The proposed laws are still moving through the legislative process and could change before becoming final. However, the direction is clear: New Jersey wants stronger control over prediction market activity within its borders.
At the same time, federal rulings suggest that platforms regulated by the CFTC may continue operating despite state-level efforts. This tension between state and federal authority will likely shape the future of prediction markets across the U.S.
As the industry grows, the outcome in New Jersey could influence how other states approach regulation, taxation, and enforcement.
