New Jersey lawmakers are moving forward with legislation that would impose a new 9% surtax on income generated by companies operating prediction markets in the state, as legislators look to tax a rapidly expanding sector while the state continues its legal fight over the industry’s future.

Senate Bill 4447, recently reported from the Senate Budget and Appropriations Committee as a substitute, would apply the additional tax to allocated taxable net income received by prediction market platforms operating in New Jersey. The surtax would be imposed on top of existing taxes, including the Corporation Business Tax. The measure would also apply a matching 9% surtax to income earned by certain partners and shareholders when that income is derived from operating prediction market platforms, in addition to the state’s Gross Income Tax.

The proposal focuses exclusively on prediction markets, which the legislation defines broadly. Under the bill, a prediction market is “any physical or electronic system that allows participants to open a speculative position on the outcome of future events, in a bid-ask format, and in any other form regardless of the mechanisms or structures used for opening speculative positions on future events.”

The bill also adopts an expansive definition of “future events.” Those include “the outcome or occurrence of a federal, state, or local election, events in popular culture, an athletic event or game of skill, any game played with cards, dice, equipment, or any mechanical or electronic device machine, and legal actions.”

Rather than separating different types of prediction markets, the legislation would apply the surtax uniformly. According to the bill, it “does not distinguish the types of speculative positions,” meaning the additional tax would apply to income generated from all qualifying prediction market activity.

New Jersey pairs proposed prediction market tax with continued legal challenge against Kalshi

The tax proposal comes as New Jersey remains involved in an ongoing legal dispute over prediction market operator Kalshi.

According to recent court filings, New Jersey Attorney General Matthew J. Platkin and Deputy Attorney General Liza Fleming