The Hidden Tax Trap in Trump’s “Big, Beautiful Bill” That Could Shake the Gambling Industry
If you’re a gambler—whether a high-stakes pro or a casual bettor—you might want to pay close attention to a little-known but potentially game-changing provision tucked inside President Donald Trump’s latest massive legislation, often dubbed the “Big, Beautiful Bill.” While it’s flying under the radar for many, this tax change could fundamentally alter how gambling losses are treated, with serious consequences for the industry and individual bettors alike.
What’s the Change?
Starting in 2026, gamblers will only be able to deduct 90% of their losses on their taxes, a sharp departure from the current system where losses can be deducted dollar-for-dollar against winnings. To put it plainly: if you lose more than you win in a year, you might still owe taxes on phantom “income” despite being in the red overall.
Take the example shared by poker pro Phil Galfond, a respected voice in the gambling community: Suppose you win $200,000 but lose $210,000 in the same year. Under the new rules, you could only deduct $189,000 of those losses, leaving $11,000 as taxable income—even though you actually lost $10,000. For professional gamblers, who often deal with millions in wins and losses, this could mean paying taxes on income they never saw, effectively inflating their taxable income by hundreds of thousands.
Why This Matters for Investors and Advisors
This change isn’t just a niche issue for gamblers; it signals a broader trend of tightening tax policies on alternative income streams. As legalized gambling explodes across the U.S., with commercial gaming revenue hitting a record $72 billion in 2024 (American Gaming Association), the government is clearly looking to capture more tax revenue from this burgeoning sector.
For investors, this means a few things:
- Increased Risk for Professional Gamblers and Gaming Stocks: Companies like DraftKings and FanDuel, which rely heavily on professional and high-volume casual bettors, could see reduced activity or backlash if bettors feel the tax burden is unfairly increased.
- Volatility in Gambling-Related Investments: With tax policies in flux, gambling-related stocks and ETFs might experience increased volatility. Investors should monitor legislative developments closely.
- Shift in Consumer Behavior: Higher tax burdens on losses could discourage high-stakes betting and push more casual bettors away, potentially slowing growth in the market.
What Should Advisors and Investors Do Now?
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Reassess Exposure to Gambling Stocks: Given the uncertainty and potential negative impact on betting volumes, it’s prudent to review holdings in gambling and gaming companies. Look for companies with diversified revenue streams beyond just sports betting.
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Monitor Legislative Developments: Rep. Dina Titus is already pushing for amendments to reverse this change. Investors should track these efforts as any reversal or modification could rapidly shift market sentiment.
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Advise Gambling Clients on Tax Planning: Financial advisors working with clients who gamble professionally or recreationally should prepare for more complex tax filings. Clients may need to plan for higher tax liabilities even in losing years, emphasizing the importance of strategic loss management and possibly consulting tax professionals specializing in gambling income.
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Consider Broader Implications for Alternative Income: This move could be a harbinger for tighter tax scrutiny on other non-traditional income sources, such as cryptocurrency trading or gig economy earnings. Investors should diversify and stay informed about evolving tax landscapes.
The Bigger Picture: Social and Economic Implications
Research indicates that the rapid expansion of legalized gambling has had mixed effects. While it generates huge revenues, there are growing concerns about financial harm to bettors. Studies have shown reduced savings rates and lower investments in safer assets among frequent gamblers, alongside rising calls to gambling addiction helplines—especially among younger men.
This tax change could inadvertently exacerbate these issues by increasing financial strain on gamblers, potentially pushing some toward riskier behavior to recoup losses. From a societal perspective, this calls for a balanced approach—protecting public revenue without stifling the industry or harming vulnerable populations.
What’s Next?
The American Gaming Association has flagged this deduction limit as a top tax priority to fix, and industry insiders expect ongoing lobbying efforts. The coming months will be critical as Congress debates potential amendments. Investors and advisors should stay vigilant and be ready to act as the situation evolves.
Final Thought
This tax provision is a stark reminder that even subtle legislative changes can ripple through entire industries and investor portfolios. At Extreme Investor Network, we believe staying ahead means not just reacting to the headlines but understanding the deeper implications—and preparing accordingly. Keep your eyes on the gambling sector’s regulatory landscape—it’s about to get a lot more interesting.
Sources:
- American Gaming Association, 2024 Commercial Gaming Revenue Report
- Statements from Phil Galfond, professional poker player
- Congressional updates from Rep. Dina Titus
- Research on gambling’s financial impact from recent academic studies
Expert Insight: If you’re advising clients involved in gambling or considering investing in gaming stocks, now is the time to revisit your risk models and tax strategies. This isn’t just a tax tweak—it’s a potential industry disruptor. Stay informed, stay agile.