Know when to fold

The Big Beautiful Bill will kill one profession

Professional gamblers get beaten by the odds

Jul 10, 2025 03:13 PM

Wager killer

THE REPUBLICANS’ sprawling new tax-and-spending law affects every industry. But a seemingly modest clause deep in its 330 pages is poised to wipe out one line of work entirely: professional gambling.

The provision reduces the share of wagering losses that are tax deductible from 100% to 90%. For sports bettors, who earn slim margins on large volumes, this change is catastrophic. One prominent gambler known as Jack Andrews explains that he is on track to have $7.7m in winning wagers and $7.3m in losing ones. If he can deduct only 90% of $7.3m, he would have to report $1.13m of “phantom” income, and would owe roughly $340,000 in federal tax on his $400,000 profit. The change can even hurt losing recreational players. If you win a $10,000 casino jackpot but surrender $10,500 on the rest of your play, you would still be taxed on $550 despite losing $500.

The clause’s origins are mysterious. It first appeared in an amendment from the Senate Finance Committee. Multiple Republican committee members have said they do not know how it got in, although the $1.1bn of revenue it is predicted to generate may have been needed to comply with Senate rules on skirting the filibuster. Dina Titus, a Democratic representative from Nevada, has already secured Republican co-sponsors for a bill reversing the measure. The American Gaming Association also supports repeal. Nonetheless, there are no guarantees that Congress will act before the change takes effect in 2026. “Nobody opposes a tax on winning gamblers, because they’re not a winning gambler,” Mr Andrews says. “It’s tough to have sympathy if you don’t have any empathy.”

Bettors can still deduct losses from wins within a single session of play. But the Internal Revenue Service (IRS) is unlikely to let punters treat a full year, or arguably even a week, as one session. In the meantime, some sports bettors are placing their hopes on a potential loophole presented by a disruptive new entrant to the industry.

Last year a federal court allowed Kalshi, a platform that lets users bet against each other on whether a stated event will occur, to offer markets on elections. Three days after Donald Trump’s inauguration, the site opened markets on sports as well. It has reason to be bold: Donald Trump junior is a strategic adviser, and Brian Quintenz—Mr Trump’s nominee to lead Kalshi’s regulator, the Commodity Futures Trading Commission—sits on its board.

More than $1bn has already been bet on Kalshi’s sports contracts, which are available even in states that have not legalised sports betting. The stock-trading platforms Robinhood and Webull offer its markets. And Kalshi claims that, unlike sportsbooks, it does not have to comply with states’ regulations or pay them taxes.

Seven states have ordered it to close these markets for their residents. However, Kalshi has won injunctions in New Jersey and Nevada preventing enforcement while courts consider the case, arguing that derivatives exchanges are federally regulated and beyond the reach of state law.

The courts may eventually side with the states. And even if Kalshi prevails, any victory may be pyrrhic, because gambling firms would open their own prediction markets to shield revenue from state taxation. FanDuel, America’s largest sportsbook, has already expressed interest.

Kalshi is only a partial substitute for sportsbooks. It does not offer markets on scoring differentials or player statistics, or let traders combine bets into parlays. And it is of use to “top-down” punters, who compare sites to find mispriced odds, only if they can bet elsewhere without prohibitive taxation. But it does have one big advantage: the IRS has not ruled on whether prediction markets count as gambling.

If pork-belly traders can net out wins and losses, why not football bettors? The agency might look askance at established gamblers shifting their income classifications abruptly. But without IRS guidance, says Russell Fox, an accountant, taxpayers can do anything reasonable, defined as having at least a 40% chance of success. It is a good bet that professional gamblers, who make their living by estimating such probabilities, will take those odds. ■