Massive $1.1B Tax Hit Sparks Outrage Among US Gambling Community
American gambling enthusiasts and professionals are facing a major financial blow as a new tax bill threatens to extract over $1.1 billion from their pockets. The controversial provision caps gambling loss deductions at 90%, effectively creating a tax on money that bettors never actually won. According to estimates by the Joint Committee on Taxation, this change will generate approximately $1.14 billion in additional tax revenue between 2026 and 2034.
Currently, gamblers can deduct 100% of their losses against their winnings when filing taxes. However, under the new provision, this deduction will be limited to just 90% of losses. For example, if someone wins $100,000 at a Las Vegas casino but loses $100,000 that same year, they would now owe taxes on $10,000 despite breaking even. Even more concerning for professional gamblers, someone who won $500,000 and lost $500,000 over a year would face taxes as if they made $50,000. Essentially, this change opens the door to a troubling scenario where gamblers might face tax bills larger than their actual net winnings. With the bill projected to extract approximately $137.5 million annually from gamblers, the industry’s fierce backlash comes as no surprise.
Trump Tax Bill Caps Gambling Loss Deductions at 90%
The recent tax legislation includes a significant modification to how gambling activities are taxed, creating widespread concern among casual and professional gamblers alike.
How the current gambling tax deduction works
Currently, gamblers who itemize their deductions can offset all their losses against their winnings, resulting in taxation only on their net profits. This means a bettor who wins $500,000 and loses $500,000 in the same tax year would have zero taxable income since they broke even. Furthermore, professional gamblers have been able to report their activities as a business, allowing them to manage their tax obligations based on their actual net income rather than gross winnings.
What changes under the new provision
Section 70014 of the new bill fundamentally alters this equation by capping deductible losses at 90% of the total losses incurred. The provision is scheduled to take effect beginning January 1, 2026. This change is projected to generate approximately $1.14 billion in additional tax revenue over nine years (2026-2034), according to estimates from the Joint Committee on Taxation.
Consider these scenarios under the new rules:
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A gambler winning $100,000 and losing $100,000 would now owe taxes on $10,000
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Someone with $500,000 in winnings and $500,000 in losses would face taxes on $50,000
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A bettor winning $200,000 while losing $210,000 would only be permitted to deduct $189,000, creating a taxable income of $11,000 despite actually losing $10,000 overall
Why the cap could lead to taxes on net losses
Perhaps most troubling, the new tax structure creates scenarios where bettors must pay taxes on "phantom income" they never actually received. In some cases, individuals who lost money gambling throughout the year will still owe taxes.
The modification particularly impacts high-volume bettors. As professional poker player Phil Galfond explained, "A pro who earns $200k/year might have $3m in winnings and $2.8m in losses. This means earning $200k and being taxed as if they earned $480k". Consequently, tax bills could more than triple for some gamblers.
Industry analysts believe the average consumer who doesn't itemize deductions will remain "largely unimpacted by the change". Nevertheless, professionals and serious hobbyists face dramatic tax increases that could fundamentally alter their relationship with gambling activities.
Gamblers and Industry Leaders Slam the Proposal
The tax provision has ignited fierce opposition across the gambling community, with professionals and industry leaders warning of devastating consequences for both individuals and businesses.
Professional gamblers warn of financial ruin
Professional poker players have been among the most vocal critics, emphasizing the existential threat to their livelihoods. Phil Galfond, who has earned nearly $3 million in live tournament winnings, explained that "a pro who earns $200k/year might have $3m in winnings and $2.8m in losses. This means earning $200k and being taxed as if they earned $480k". Doug Polk, with over $10 million in poker tournament earnings, stated bluntly that the provision "will kill professional gambling" and "negatively impact THOUSANDS" of careers.
Sports bettor Rufus Peabody highlighted a particularly troubling aspect: "Someone can lose money gambling, and still owe taxes on it". This paradoxical situation occurs because only 90% of losses would be deductible against winnings.
Casino owners and operators voice concern
Derek Stevens, co-owner of several Las Vegas casinos including Circa and The D, has aligned with opponents of the provision. The American Gaming Association, representing an industry that generated nearly $72 billion in commercial gaming revenue in 2024, indicated they "look forward to working closely with Congress in the coming months to address the changes to wagering deduction losses".
Online gambling platforms fear user drop-off
Alex Kane, CEO of betting exchange Sporttrade, expressed alarm about the provision's impact: "No one serious about betting is going to bet anymore, or at least not going to report that they do". Jordan Bender, an equity research analyst, noted the bill "will increase the likelihood that poker players, whales and VIPs will find other ways to gamble outside the legal framework".
Social media erupts with criticism
The announcement prompted immediate backlash across social platforms. Tony Dunst called it a "potential disaster", and professional gambler Rob Pizzola warned it "could hurt every gambler in America. Not just pros. Not just high rollers. Everyone". Nate Silver, political data analyst, pointed out that "tax code is already punitive to poker players" and this change would "make it considerably worse".
Experts Warn of Shift to Offshore and Illegal Gambling Sites
Tax experts and industry analysts predict a mass exodus of gamblers to unregulated markets if the proposed 90% cap on loss deductions becomes law. This shift threatens to undermine regulated gambling while strengthening already substantial illegal operations.
Why gamblers may turn to unregulated markets
The American Gaming Association estimates Americans already bet more than $510.9 billion annually with illegal and unregulated operators. The proposed tax changes would accelerate this trend as bettors seek tax-advantaged alternatives. Professional gamblers would face the greatest pressure to move offshore, effectively making legal gambling financially untenable. As one industry expert noted, the adjustment "will increase the likelihood that poker players, whales and VIPs will find other ways to gamble outside the legal framework".
Currently, illegal sportsbook operators capture nearly 40% of the U.S. sports betting market. Moreover, approximately 49% of past-year sports bettors have already placed bets with illegal operators. These numbers could climb dramatically under the new tax regime.
Impact on legal gambling websites and apps
Legal gambling platforms stand to lose substantial market share and revenue. The American Gaming Association reports illegal gambling costs the legal industry $44.2 billion in gaming revenue and state governments $13.3 billion in lost tax revenue.
DraftKings CEO warned that similar tax hikes at the state level "will drive players to illegal betting sites". Analysts project DraftKings' and FanDuel's top-line growth could drop by 10-15% annually, with EBITDA margins pressured to below 20%. Additionally, states reliant on gaming revenue may face job losses and tax base erosion.
How prediction markets may become a loophole
Prediction markets like Kalshi operate under financial rules rather than gambling laws. This distinction creates a significant tax advantage as event futures markets are regulated by the Commodity Futures Trading Commission and governed as investments—meaning Trump's proposed 90% cap would not apply.
Unlike conventional gambling losses, losses in prediction markets can be written off against other traditional investments. This structure "looks more aligned with how sharp bettors think", potentially creating a competitive advantage that could draw sophisticated gamblers away from traditional platforms.
Lawmakers Push Back and Explore Legislative Fixes
Amid growing backlash from the gambling community, lawmakers have begun responding to concerns about the controversial tax provision.
Rep. Dina Titus leads opposition in Congress
Democratic Representative Dina Titus of Nevada has emerged as the primary congressional advocate fighting against the gambling tax change. Shortly after the Senate passed its version of the bill, Titus announced she was seeking to amend the provision. "Buried within the BS Republican Budget bill is a provision that harms poker players and those who gamble by limiting loss deductions," Titus wrote on social media. She immediately pledged to develop "a legislative fix that fairly treats gaming losses in the tax code".
Titus, who co-chairs the Congressional Gaming Caucus, called the provision "another attack on gaming and tourism" that would harm districts reliant on these industries. She warned it "punishes people properly reporting gambling on taxes" by giving them incentives to use offshore outlets.
Senate and House versions of the bill differ
A crucial distinction exists between the two chambers' approaches. The House version of the bill, passed earlier, did not contain the gambling tax provision. This difference created an opportunity for potential removal as lawmakers reconciled the versions. As one gaming industry source noted, the differences between the bills meant the House could still strip the language before final passage.
What changes could still be made before 2026
The implementation date provides a critical window for legislative action. If signed into law as currently written, the gambling loss limitation wouldn't take effect until 2026. This timeline gives lawmakers nearly two years to propose amendments or standalone bills. Speaker of the House Mike Johnson indicated two more reconciliation bills would come during this congressional session, offering additional vehicles for fixes.
How the $1.1B revenue projection influences debate
The Joint Committee on Taxation estimates the provision would generate approximately $1.14 billion in additional tax revenue between 2026-2034. This revenue projection creates a significant hurdle for repeal efforts, as noted by NTRA CEO Tom Rooney: "People ask why they're moving this gambling tax from 100% to 90%, it's because of revenue, and just trying to find money wherever they can".
Conclusion
The proposed tax changes targeting the gambling industry stand as a watershed moment for American bettors. Undoubtedly, the $1.1 billion tax hit represents more than just additional revenue for the government—it fundamentally alters the relationship between gamblers and the tax system. The 90% cap on loss deductions effectively creates a scenario where breaking even still results in tax liability, a concept that defies conventional financial logic.
Professional gamblers face particularly dire consequences. Their entire business model, built around high-volume betting with slim margins, becomes nearly unsustainable under these new rules. Many will likely abandon their careers or seek alternatives outside the regulated market.
This tax provision also threatens to undermine years of progress in creating a regulated gambling industry. After all, when legal gambling becomes financially punitive, players naturally gravitate toward unregulated markets. The American gaming industry, which generates billions in revenue and supports countless jobs, could see significant contraction as a result.
Nevertheless, hope remains for those opposing this provision. The implementation date of January 2026 provides a critical window for legislative intervention. Rep. Dina Titus and other lawmakers have already begun crafting potential fixes, recognizing the provision's flaws and unintended consequences.
The battle over gambling taxation reflects a broader question about fairness in the tax code. Should individuals pay taxes on money they never actually received? Should an industry be singled out for such distinctive treatment? The answers to these questions will shape not just gambling's future but potentially set precedents for other sectors as well.
The gambling community now faces an uncertain period ahead. Though the immediate impact remains months away, the long-term consequences of this provision—whether amended or implemented as written—will reshape America's gambling landscape for years to come.