New Federal Tax Rules for Gamblers

Nevada gamblers and casual bettors nationwide face a new tax reality: Starting in 2026, gamblers nationwide can deduct just 90% of their losses against winnings, a drop from the prior full 100% allowance.

The change applies across the board — from dice rolls and blackjack to sports betting, poker and every other game in casinos here and nationwide, along with horse racing and dog racing.

A player breaking even at $10,000 wagered throughout the year would still owe taxes on $1,000 of so-called “phantom” winnings, which could tack on several hundred dollars to their bill based on their tax bracket.

How the Provision Was Enacted

Slipped into President Donald Trump’s Republican-led One Big Beautiful Bill, the provision has drawn sharp criticism from Nevada lawmakers and the gaming sector, prompting early legislative efforts to roll it back.

Just 18% of people surveyed in February 2025 by tax help company TaxAct were aware they were legally required to report their winnings to the IRS. And only a quarter understood that sports betting winnings were taxable income, according to the survey.

“Ninety percent of players lose,” said Russell Fox, managing member of Clayton Financial and Tax. “Those people aren’t coming to me, and most are probably leaving their gambling off their tax returns unless they have a win, and they’ve been able to say, rightly, my losses have exceeded my wins every year.”

A 2024 audit by the U.S. Treasury Inspector General for Tax Administration revealed that inadequate enforcement on gambling winnings cost the government $1.4 billion in uncollected taxes from 2018 to 2020.

Impact on Professional and Ethical Bettors

Fox said professional gamblers would alter their behavior because of the tax change.

For nearly all ethical sports bettors, an extra 10% “IRS rate” will prove impossible to beat given sportsbooks’ slim edges, he said. The overall sports betting handle — the total money wagered by all bettors — will decline as a result, Fox predicted.

The effect is likely to be more pronounced in the Silver State. That’s because Nevada relies heavily on the industry’s tax revenue to function, with the state bringing in around $1 billion from gaming to its general fund during the 2024 fiscal year, or about 17% of the fund’s revenue.

Ted Sevransky, a Las Vegas sports bettor known as “Teddy Covers,” agreed that the tax change may never affect casual players’ behavior, but said some professional gamblers were already looking at workarounds.

Prediction Markets as a Possible Workaround

One option is prediction markets, where platforms like Kalshi allow people to trade contracts that resolve based on event outcomes. Contract values — typically “yes” or “no” — fluctuate with buying and selling activity. If someone buys “yes” at 65 cents and is correct, they profit 35 cents per contract.

Though prediction markets can cover virtually any event, sports are Kalshi’s core business.

Most importantly for professional gamblers, prediction markets are regulated by the Commodity Futures Trading Commission and aren’t classified as gambling.

The American Gaming Association views prediction markets as sports betting operating nationwide without state oversight. The Nevada Gaming Control Board issued a cease-and-desist order against Kalshi’s prediction market sports contracts, a subject that Kalshi and Nevada regulators continue to litigate.

“If it looks like a duck, walks like a duck, quacks like a duck, it might just be a duck,” Fox said. “The prediction markets, when they’re offering sports predictions, that’s sports betting. Everyone knows it.”

Fox says he expects that the U.S. Supreme Court, when it inevitably hears a case on prediction markets, will want to keep regulatory power with the states.

Sevransky wouldn’t go into further detail about other workarounds professional gamblers are discussing, but said he expects that some bettors’ “money would start to flow into other markets that are not being taxed and regulated by the U.S. as a direct result of this legislation.”

“When you’re talking about successful professional gamblers, there aren’t that many of them, and they tend to be pretty sharp guys,” he said. “So, when you think about figuring out workarounds, you’d expect them to find ways not to have to pay the extra tax.”

Legislative Pushback: FAIR BET and FULL HOUSE Acts

U.S. Rep. Dina Titus, D-Nev., made a similar point in a letter last month to Rep. Jason Smith, R-Mo., chairman of the House Ways and Means Committee. Titus asked Smith to expedite a hearing for her FAIR BET Act, which would reverse the tax change brought on by theOne Big Beautiful Bill.

The policy will “have significant and harmful consequences,” she wrote to Smith.

“It unfairly burdens professional gamblers and casual players alike and will inevitably drive players toward offshore and unregulated markets where consumer protections are non-existent, thereby undermining responsible gaming efforts nationwide,” she wrote.

The Facilitating Useful Loss Limitations to Help Our Unique Service Economy, or FULL HOUSE Act, is companion bipartisan legislation in the U.S. Senate that “restores professional gamblers’ ability to deduct 100% of their gambling losses.” It was introduced in July by Sens. Catherine Cortez Masto and Jacky Rosen, both D-Nev., and Republican Sens. Ted Cruz of Texas and Bill Hagerty of Tennessee.

“Taxing people on money they don’t have will stifle the tourism industry in states like Nevada, push poker tournaments offshore, and drive betting into underground, unregulated markets,” Cortez Masto said. “There is bipartisan support to fix this mistake, and it is time for my colleagues in both parties and chambers of Congress to get it done.”

Rosen echoed the comments, saying in a statement that “if we don’t fix this misguided provision, people would be discouraged from visiting casinos and Nevada’s tourism economy would take a hit.”

Like its House counterpart, the proposal in the Senate has yet to have a committee hearing.

Industry Response and Broader Concerns

Nevada resorts are also pushing for a change, with Circa Las Vegas owner Derek Stevens being the most visible in his advocacy.

In a video posted to social media, Stevens highlighted how the FAIR BET Act has bipartisan support, saying he didn’t know a single member of the House or Senate that supported keeping the change in place. The video was posted Dec. 11 after a meeting with Smith.

It “impacts the entire hospitality industry, the tourism industry, all of our employees, which is critical, as well as most of Americans who made a bet in the last year,” Stevens said. “This one should not be hard when everyone’s in agreement.”

Nevadans aren’t alone in their concern.

In July, U.S. Rep. Andy Barr, R-Ky., introduced the Winnings and Gains Expense Restoration (WAGER) Act aimed at strengthening the horse racing industry that would allow gamblers to fully deduct legitimate wagering losses from their winnings.

“Ensuring horseplayers can fully deduct losses is essential to maintaining a healthy wagering ecosystem that drives purses, supports breeders and sustains the broader racing economy,” said Shannon Arvin, CEO of Keeneland, a historic thoroughbred racetrack and auction house in Lexington, Ky.

Barr’s bill, which also hasn’t been heard, mirrors Titus’ proposal. She says she supports it.

“If they are more inclined to pass a Republican bill than my bill, OK, we’re working there too,” Titus said. “Everybody knows we started this and we’re going to keep pushing it, whatever mechanism we can use.”

A reversal could also be included in the upcoming appropriations package. The current continuing resolution, which ended the longest-ever government shutdown in November, expires at the end of January.