New Jersey Sportsbooks Receive Tax Breaks on Free Play, Esports Betting Authorized

New Jersey sportsbooks will pay less tax on promotional credits used to lure in new bettors after Gov. Phil Murphy (D) signed a measure to deduct such revenue from their tax liabilities.

New Jersey sportsbooks free-play promotional credits
New Jersey sportsbooks free-play promotional credits
The FanDuel Sportsbook at the Meadowlands Racetrack in New Jersey can now remove certain promotional sports betting credits issued to patrons from its tax bill. The legal change should result in more free bets for new and returning retail customers. (Image: Google)

Murphy recently signed Assembly Bill No. 4002, which reduces taxes on certain revenue sportsbooks generate from free-play credits. Such marketing ploys are widespread, examples including companies like DraftKings and FanDuel matching first-time deposits for new accounts and offering risk-free bets.

New Jersey previously allowed online sportsbooks to deduct some of their income from free-play offers. A4002 allows brick-and-mortar sportsbooks at casinos and horse racetracks to also deduct some gaming revenue from promotional play.

Murphy signed the measure on January 18, the same day he was officially sworn in for his second term as governor of New Jersey.

Tax-Free Free-Play Details

New Jersey sportsbooks — both retail and online — can now strike certain revenue that came by way of promotional credits regardless of whether the free bets featured stipulations such as a play-through requirement. Play-through, sometimes called a rollover, requires a customer to bet their own actual money totaling the amount of the free credit before they qualify to withdraw from their gaming account.

A4002 specifies that promotional credits for land-based sportsbooks can only be deducted for betting credits in excess of $8 million each year. For online books, the tax break kicks in after $12 million in gaming credits are issued.

Casinos and horse tracks argued the promotional tax law put their brick-and-mortar operations at a competitive disadvantage with the online sportsbooks. Lobbyist Bill Pascrell III of Princeton Public Affairs, who helped convince lawmakers to pursue the tax change, said A4002 is a win-win.

It’s good for customers because they get the promotional gaming credit. It’s good for the casinos and racetracks because they get the tax deduction,” Pascrell summarized.

The sports betting promotional write-off is yet another tax break afforded to the state gaming industry. Murphy in December signed legislation that removes iGaming and online sportsbook revenue from the calculation used to determine how much property taxes the nine Atlantic City casinos pay in a given year. The bill is expected to save the casinos $55 million in 2022 alone.

The sports betting tax change, however, won’t have nearly the fiscal consequences. The New Jersey Office of Legislative Services says the state will lose around $100,000 to $150,000 per $1 million in promotional credits issued above the thresholds.

Roughly $987 million was wagered on-site at New Jersey casino and racetrack sportsbooks last year. By comparison, nearly $9.5 billion was wagered via online books.

Esports Betting Approved

In other New Jersey gaming news, the state’s Division of Gaming Enforcement this week approved a sports betting application from Bally’s to include odds on esports tournaments. Bally’s has been granted permission to expand its affiliate program to include esports betting firm is currently amid a soft launch in New Jersey. The esports firm says following a five-day test run, pending final regulatory approvals, its book will open up to the general public and offer lines on an array of popular esports games and tournaments, including “Call of Duty” and “League of Legends.”

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