New Jersey's latest budget proposal could shake up the online sports betting (OSB) and iGaming landscape.

JPMorgan analyst Joseph Greff is ringing the alarm. Governor Phil Murphy's fiscal year 2026 budget plan includes a tax rate hike for OSB and iGaming operators, jumping to 25% from 13% and 15%, respectively.

While this isn't a done deal - last year's proposed increase to 30% failed - the governor's endorsement raises the odds of some form of tax bump passing this time.

DraftKings Feels The Heat

If implemented by July 2025, Greff estimates that DraftKings Inc (DKNG  ) could take a $52 million to $57 million EBITDA hit next year. That's roughly 5% to 6% of its projected 2025 EBITDA midpoint of $950 million - no small change.

Investors may recall DraftKings already bracing for a $50 million hit in the second half of 2024 due to Illinois' tax hike. This latest proposal would add another hurdle for the sports betting giant.

Other Operators In The Crosshairs

It's not just DraftKings feeling the squeeze.

BetMGM, a subsidiary of MGM Resorts International (MGM  ), could see a $35 million to $39 million EBITDA impact.

On the other hand, Caesars Digital, a unit of Caesars Entertainment Inc (CZR  ) and PENN Entertainment Inc's (PENN  ) Penn Interactive would take smaller, yet still noticeable, hits of $15 million to $16 million and $3 million to $4 million, respectively.

Investor Implications: Who Comes Out On Top?

While tax increases are never welcome news, Greff suggests that the biggest players - like DraftKings and BetMGM - are best positioned to weather the storm. Their scale and brand power provide some cushion against regulatory shifts.

Additionally, states looking to plug budget gaps could accelerate iGaming legislation, potentially creating new market opportunities. For investors, keeping an eye on legislative developments in New Jersey and beyond could be key to navigating the evolving regulatory landscape.