How Trump’s Tax Overhaul Could End Pro Sports Betting

For corporate America, the One Big Beautiful Bill (OBBB) is a jackpot of Trump-era tax cuts, extended breaks, revived incentives, and a big ol’ wink at shareholder supremacy. But buried deep in its 330-page buffet is a tax twist that’s got bettors sweating harder than a parlay gone wrong. As of January 1, 2026, the IRS will begin taxing phantom income, which includes winnings you never actually received. A new rule caps gambling loss deductions at 90%, meaning even if you break even, you could owe thousands in taxes. This isn’t just a financial nuisance; it’s an existential threat to professional sports gamblers, many of whom run lean, data-driven operations with razor-thin profit margins. It’s not Big Oil or Big Tech in the crosshairs this time. It’s the line-watchers, the prop-bettors, the spreadsheet warriors of the $10B+ legal betting economy. And while the house always wins, this time it’s collecting even when it shouldn’t.

When Bettors Got a Breather

Before OBBB came swinging like a casino pit boss on bonus denial day, professional and high-volume sports gamblers had a simple deal with Uncle Sam: win or lose, they only paid taxes on real, net profits. If you won $200,000 but lost the same amount, you owed zilch. The tax code, specifically IRC Section 165(d), lets you offset gambling winnings with gambling losses, dollar for dollar. It wasn’t some slick loophole. It was math. Fair and square. This principle turned high-stakes betting into a legitimate profession. Sure, the odds were tight, but the rules were at least predictable. It gave sports gamblers room to operate like real businesses, complete with volatility and risk, just like a hedge fund or a Main Street startup.

OBBB Just Flipped the Script

Then came July 4, 2025, fireworks, flags, and a surprise gut-punch to the gambling class. Slipped into the final version of the reconciliation bill, OBBB’s new rule caps gambling loss deductions at 90%. Sounds small? It’s a killer. Let’s break it down:

• Win $200,000, lose $200,000. Under old law? No tax.
• Under OBBB? You can only deduct $180,000 of those losses.

So, you’re stuck paying tax on $20,000 of income that never existed. 

At a 24% rate, that’s $4,800 owed for nothing. And if you’re a high earner climbing into the 35–37% bracket, the effective tax rate on gross income hits a ridiculous 74%. As tax professionals now say: that’s not a margin call; it’s a margin funeral. Even casual gamblers get burned. Someone who breaks even over 12 months, say, winning $10,000 and losing $10,000, still ends up taxed on $1,000 of “profit.” According to Dina Titus, it’s a tweak that “will drive people away from the regulated gaming market into the black market.”

Titus and Trump’s Crew Call It Out

Here’s where it gets spicy.

Rep. Dina Titus (D-NV), co-chair of the Congressional Gaming Caucus, didn’t just raise hell; she drafted the FAIR BET Act on July 7 to repeal the change. She called the tax tweak “anti-gaming bias disguised as fiscal policy.” She warned that the provision doesn’t raise meaningful revenue but could choke off a multi-billion-dollar economic stream. Even Trump loyalists like Rep. Troy Nehls (R-TX) and Rep. Jeff Van Drew (R-NJ), the latter famously pledged “undying support” to Trump, are backing Titus’ bill. That’s rare air: a cross-aisle gaming rebellion.

Why the sudden unity? Because this clause wasn’t debated, disclosed, or defended. It was slipped into the Senate version, as Titus argues, to plug budget holes with “a little pot of a billion dollars.” Meanwhile, the American Gaming Association, initially quiet and deferential, has reversed course. ESPN reports the group now backs Titus, warning that OBBB could push betting revenue into the shadows and create a compliance nightmare for both the IRS and gamblers.

Workarounds and Grey Zones

With repeal uncertain, gamblers are seeking opportunities in the tax gray zone. Some are reclassifying their operations as sole proprietorships or S Corps to take advantage of broader “ordinary and necessary” business deductions, think research tools, subscriptions, legal advice, or travel. These don’t fall under the 90% cap and could help soften the blow, though aggressive deductions may still trigger IRS audits.

And then there’s Kalshi, the upstart prediction exchange legally blessed by the CFTC and operating in the regulatory Bermuda Triangle. Users can “wager” on outcomes, sports, politics, and even weather, through event contracts. It’s not technically gambling, it’s not fully finance, and the IRS hasn’t dropped a ruling on it yet. That means Kalshi could be the next frontier for strategic bettors looking to avoid OBBB’s hammer.

What the Tax Code Says About Risk

This isn’t just a gambling story. It’s a story about how America taxes risk. Corporate investors can incur losses. Real estate moguls can 1031-exchange their way to deferrals. Hedge funds write off drawdowns. But if you're a sports gambler, essentially a quant in Nikes, you’re being punished for volatility. The logic? If your hustle is unconventional, your tax breaks are optional. That should worry everyone in finance, accounting, and business advisory circles. Because once lawmakers start carving out “unusual” professions from fair tax treatment, it sets a dangerous precedent. What’s next, day traders, fantasy stock pickers, crypto arbitrageurs?

Final Word

Congress thinks it’s pulling $1.1 billion out of gamblers’ pockets. But here’s the rub: if those bettors walk away, or duck into cash-only corners of the internet, that billion becomes zero. As Titus put it, “Tax policy is supposed to be fair. You’re not supposed to pay income tax on income you don’t get.” The real gamble here isn’t at the sportsbook; it’s on Capitol Hill. And if Washington plays this hand wrong, it’s not the gamblers who’ll fold. It’s the ecosystem: the platforms, the jobs, the state revenue, and yes, even the tax base. Because let’s face it: you can’t tax a poker table with no players.