Result
Starting from January 1, 2026, U.S. high-stakes sports bettors will encounter a significant change in their tax deductions for gambling losses. Under the new rule, only 90% of their losses can be deducted against their winnings, a decrease from the prior 100% deduction limit [1][2][3][5].
This change is part of the One Big Beautiful Bill Act, which was signed into law on July 4, 2025. Previously, gamblers who itemized deductions could offset their gambling winnings dollar-for-dollar with losses, effectively paying taxes only on net positive income. The new rule, however, means that if a bettor wins $500,000 and loses an equal amount, they can now only deduct $450,000 of those losses, resulting in $50,000 of taxable "phantom income" that they did not actually gain in cash terms [3].
This provision applies to all forms of gambling, including sports betting, daily fantasy sports, horse racing, and casino games. It is expected to generate approximately $1.1 billion in federal revenue over the next decade [2][3]. The law may disproportionately affect professional or high-volume bettors due to the reduced loss deduction cap.
Poker pro Phil Galfond has warned that this change could push professionals out of the business entirely. High rollers, who accounted for nearly 70% of PointsBet's total revenue despite making up just 0.5% of their customer base in 2019-2020 [4], might find the new rule challenging.
The industry is facing a balancing act between compliance, competition, and customer loyalty due to rising taxes and increased competition from lightly regulated markets. Chad Beynon of Macquarie Group has suggested that one sportsbook is exploring meet-and-greets with pro athletes as a new form of reward [4].
The U.S. is monitoring how other countries handle VIP treatment, particularly the UK's new laws that slashed VIP membership by over 90%. The updated SAFE Bet Act proposes similar guardrails, suggesting potential restrictions for U.S. VIP programs [4].
In response to these changes, Nevada Congresswoman Dina Titus has introduced the Fair Bet Act, which would restore the full deduction for losses. However, the future of this act remains uncertain [4].
In summary, the most significant current change is that starting tax year 2026, gambling losses can only offset 90% of gambling winnings, potentially increasing taxable income for sports bettors in the U.S. [1][2][3][5].
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- With the new tax rule for gambling losses, sports bettors might have to pay taxes on an additional $50,000 of "phantom income" if they win and lose an equal amount, as outlined in the One Big Beautiful Bill Act [3].
- Professional poker player Phil Galfond has warned that the reduced loss deduction cap in sports betting could drive some professionals out of the business, adversely affecting high-volume players [4].
- As the new tax regulations impact sports betting, some industry experts suggest that U.S. sportsbooks may start offering unique rewards, such as meet-and-greets with professional athletes, to retain their high roller customers [4].
