Ascendancy of DraftKings and FanDuel in New Jersey’s online casino sector

Lea Hogg May 21, 2024

SiGMA news

Ascendancy of DraftKings and FanDuel in New Jersey’s online casino sector

DraftKings and FanDuel have emerged as frontrunners in New Jersey, contributing to the state’s second-highest monthly revenue ever. The revenue figures for New Jersey’s online casinos reveal an impressive total of $187.9 million, falling just short of March’s record-breaking $197.2 million.

This figure, while being the second-highest, also marks an 18.2 percent increase year-over-year. In the first four months alone, New Jersey has amassed over three-quarters of a billion dollars, totalling $750.7 million. This is a significant 21.2 percent increase compared to the previous year, which saw a total revenue of $1.92 billion. The state is currently on track to exceed $2.2 billion in revenue this year, surpassing the single-year record of $1.92 billion set in 2023 and the previous record of $1.66 billion in 2022.

In terms of taxation, the state has collected nearly $113 million, with $28.3 million accrued in April alone. The tax rates in New Jersey vary depending on the type of gaming venue, with retail casinos taxed at 8 percent, online sports betting at 13 percent, retail sports betting at 8%, and online casino play at 15 percent.

Examining the top licencees, Golden Nugget Atlantic City leads the pack with over $53 million in revenue. However, Caesars Interactive was the only licensee that failed to meet the $1 million mark.

DraftKings led with $39,238,978, closely followed by FanDuel with $39,063,216. Together, DraftKings and FanDuel accounted for nearly 42 percent of the state’s revenue, outperforming the combined total of the next seven online casinos. Five other online casinos, including BetMGM, Borgata, and Caesars Palace, reported revenues in the eight digits. On the other end of the spectrum, Unibet, which is withdrawing from the United States, reported a loss of more than $6,000, while Jackpot City, a newer online casino, reported just over $25,000 in revenue.

The tax structure for online gambling in New Jersey is quite straightforward and is designed to ensure fair and regulated gambling activities. Here are the key points:

Tax on Winnings: All gambling winnings, including those from online sources, are considered taxable income. Therefore, you are required to report these winnings to the Internal Revenue Service when you file your tax returns.

Tax Rates: The tax rates vary depending on the type of gaming venue:

✅ Retail casinos are taxed at 8 percent.

✅ Online sports betting is taxed at 13 percent.

✅ Retail sports betting is taxed at 8 percent.

✅ Online casino play is taxed at 15 percent.

Thresholds for IRS Notification: The IRS is not notified unless you win an amount that exceeds certain prescribed thresholds. These thresholds vary depending on the form of gambling that generated the win.

State Tax Withholding: For federal taxes, NJ sportsbooks are required to withhold 28 percent of the winnings if you win $5,000 or more. On the state level, if you win more than $10,000 in a single jackpot, the payer will withhold 3 percent to comply with state laws.

Income Tax Brackets: On the state level, there are seven income tax brackets, ranging from 1.4 percent for the lowest income earners up to 10.75 percent for those at the top of the scale.

Group Gambling Winnings: If a group of people pool their resources for gambling, the paying entity will submit Form 5754 to the IRS when they are filing the W-2G. The IRS will then know that multiple people will be responsible for individual portions of the income.

Penalties for Non-Payment: If you fail to pay taxes on your gambling winnings in NJ, the Internal Revenue Service will apply a Failure to Pay penalty. For each month that you are delinquent, they will increase the amount that you owe by .05 percent. However, the accumulated penalty maxes out at 25 percent.