President Donald Trump’s “One Big Beautiful Bill Act” (OBBBA), a sweeping tax and spending package passed by the Senate on July 1st, 2025, with a tie-breaking vote from Vice President JD Vance, is poised to reshape the financial landscape for sports bettors across the United States. The bill, now awaiting final approval from the House of Representatives, introduces significant changes to the tax code that could profoundly affect both professional and recreational sports bettors.
Below, we explore the key provisions of the bill, their implications for sports betting, and the broader impact on the gambling industry.
Key Tax Changes for Sports Bettors
The most significant change in the OBBBA for sports bettors is the modification to gambling loss deductions, outlined in Section 70014 of the Senate’s version of the bill. Under current U.S. tax law, gamblers who itemize their deductions can offset their gambling winnings with 100% of their losses, provided the losses do not exceed the winnings in a given tax year. This means that if a bettor wins $100,000 but loses $100,000, they can deduct the full amount of losses, resulting in no taxable gambling income if they break even.
The OBBBA, however, caps gambling loss deductions at 90% of winnings starting in 2026. This creates a “phantom tax” scenario where bettors could owe taxes on winnings even if they break even or lose money overall.
For example:
- A bettor who wins $100,000 and loses $100,000 in a tax year would only be able to deduct $90,000 of their losses. This leaves $10,000 of taxable income, despite no net profit.
- A professional bettor who wins $5.2 million but loses $5 million would face taxes on $700,000 of “income,” potentially turning a profitable year into a significant financial loss after taxes, as highlighted by a professional gambler cited in a Front Office Sports report.
Additionally, the bill groups gambling-related expenses—such as travel, lodging, and tournament entry fees for professional bettors—under the same 90% deduction limit. This restriction could hit high-volume bettors, particularly professional sports bettors and poker players, the hardest, as their business expenses are no longer fully deductible.
Another provision in the bill provides relief for casual bettors by raising the threshold for third-party payment reporting. Under the American Rescue Plan Act of 2021, platforms like PayPal, Venmo, and Cash App were required to issue IRS Form 1099-K for transactions exceeding $600. The OBBBA reinstates a higher threshold of $20,000 and 200 transactions, reducing the likelihood that recreational bettors will receive tax forms for small or informal transactions. This change simplifies tax reporting for casual bettors but does little to offset the broader impact of the loss deduction cap.
Implications for Professional and Recreational Bettors
Professional Bettors
Professional sports bettors, who rely on high-volume betting to generate consistent profits, face significant challenges under the OBBBA. The 90% deduction cap means that even bettors who break even or lose money could owe substantial taxes. For example, a professional bettor who generates $1 million in winnings but incurs $1 million in losses could still face a tax bill on $100,000 of “income,” potentially wiping out their profits or pushing them into debt. Industry experts warn that this could “implode the entire gaming industry,” as stated by professional gambler Captain Jack Andrews on X.
The financial strain could force some professional bettors to relocate to jurisdictions with more favorable tax laws or turn to unregulated offshore sportsbooks, which could undermine the domestic gambling industry. Nevada Representative Dina Titus, a vocal critic of the provision, noted that it unfairly targets gaming and could harm jobs and the economy in states like Nevada, where gambling is a major industry.
Recreational Bettors
While only about 10% of U.S. taxpayers itemize their deductions, meaning the average recreational bettor may be “largely unimpacted” by the deduction cap, the change could still affect those who bet significant amounts. For instance, a recreational bettor who wins $10,000 but loses $10,000 would owe taxes on $1,000 of “income,” adding an unexpected tax burden. This could discourage high-volume recreational betting and push some bettors toward unregulated platforms, as noted in posts on X.
The rollback of the third-party reporting threshold offers some relief for casual bettors, reducing the administrative burden of receiving tax forms for small transactions. However, this benefit is overshadowed by the broader tax implications for those who itemize or bet large sums.
Broader Industry Impact
The OBBBA’s tax changes could have ripple effects across the sports betting and gambling industry, which generated nearly $115 billion in revenue in 2024, according to the American Gaming Association. Key concerns include:
- Shift to Offshore Betting: The increased tax burden could drive both professional and recreational bettors to unregulated offshore sportsbooks, which are not subject to U.S. tax laws. This could reduce revenue for regulated operators like DraftKings and FanDuel, who have already declined to comment on the bill’s impact.
- Impact on Horse Racing and Other Sectors: The National Thoroughbred Racing Association (NTRA) has expressed concerns that the tax changes could reduce gambling revenue for horse racing, particularly in jurisdictions reliant on betting income. NTRA CEO Tom Rooney emphasized that discouraging bettors could hurt the sport’s bottom line.
- Potential Push to Event Futures Markets: The bill’s tax changes do not apply to event futures markets regulated by the Commodity Futures Trading Commission (CFTC), such as those offered by Kalshi. This could nudge bettors toward these markets, further disrupting the sports betting industry.
State-Level Tax Pressures
In addition to federal changes, sports bettors face increasing costs at the state level. For example, Illinois implemented a per-bet tax on July 1, 2025, requiring online sportsbooks to pay 25 cents per wager for the first 20 million bets annually and 50 cents thereafter. Operators like DraftKings and FanDuel plan to pass these costs onto users through transaction fees starting September 1, 2025. Similarly, New Jersey has increased tax rates on online sports betting and introduced stricter regulations, adding further financial pressure on bettors.
Opposition and Legislative Outlook
The gambling tax provision, absent from the House’s version of the bill passed in May 2025, has drawn significant opposition. Professional poker player Doug Polk urged Texas Representative Chip Roy to remove the provision, warning that it could “instantly” end the careers of thousands of professional gamblers. U.S. Representative Dina Titus, alongside Las Vegas casino owner Derek Stevens, has pledged to work on a legislative fix to restore fair treatment of gaming losses.
As of July 3, 2025, the House is debating the Senate’s amendments, with a final vote expected soon. President Trump has pushed for the bill to reach his desk by July 4, though he acknowledged this deadline may be challenging. If the House adopts the Senate’s gambling tax provision, the changes will take effect in 2026. However, efforts to strip the provision face hurdles, as the tax change is projected to raise over $1 billion in federal revenue over the next decade, helping offset the bill’s $3.3 trillion deficit increase.
Final Thoughts
Trump’s Big Beautiful Bill introduces a significant shift in how sports bettors are taxed, capping gambling loss deductions at 90% and potentially imposing taxes on “phantom” winnings. While casual bettors may benefit from relaxed third-party reporting rules, the overall impact is likely to increase costs for both professional and high-volume recreational bettors. The changes could push betting activity to unregulated markets, reduce revenue for domestic operators, and affect related industries like horse racing. As the bill heads to the House for a final vote, the sports betting community awaits clarity on whether opposition from lawmakers and industry advocates can soften its impact.