The One Big Beautiful Bill Act institutes a seemingly minor change that will have major unintended consequences.
You never know what you might find at the bottom of a big, beautiful bill. Tucked away in the new law are a few short provisions that might spell the end of legal sports betting. The One Big Beautiful Bill Act institutes a seemingly small change to the way Americans can write off wagering losses, which at first glance looks like an effective federal tax on gambling. Yet even those of us worried about the meteoric rise of the legalized sports book—it’s a $14 billion industry growing by about 20% annually—have serious concerns about regulating betting this way.
Until the new law’s provisions go into effect next year, sports bettors pay taxes on their net winnings as if it were regular income. Bettors are allowed to offset their losses against their winnings each year. So a bettor who finishes the year with $5,000 in winnings and $4,000 in losses would pay income tax on the $1,000 net.
The new bill upends this arrangement by allowing for only 90% of losses to offset winnings, starting in 2026. That bettor who won $5,000 and lost $4,000 would be able to offset his winnings with only $3,600. He would be taxed as though he had netted $1,400 despite only being $1,000 in the black. In other words, he would be taxed on $400 he didn’t collect. Bettors who end the year unprofitable or narrowly in the red have it even worse. Someone who breaks even on $5,000 worth of bets would be able to register only $4,500 in losses, which means he’s on the hook for $500 in taxable income essentially for the right to play the game.
Continue reading the entire piece here at the Wall Street Journal (paywall)
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Tal Fortgang is an adjunct fellow at the Manhattan Institute. He was a 2023 Sapir Fellow.
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