Share 
State of Play
- State and federal gambling laws are set to change significantly in 2026, affecting how gamblers nationwide report winnings and losses on their taxes.
- These changes come amidst rising popularity of sports betting and prediction markets, alongside state-level crackdowns on certain gambling formats.
One key federal change is driven by President Trump’s One Big Beautiful Bill Act, which introduces a critical tax provision impacting gamblers. Starting in 2026, gamblers can only deduct 90% of their losses against their winnings for tax purposes, rather than 100% as before.
For example, if a gambler wins $100,000 but also loses $100,000, they will owe taxes on $10,000 of what is sometimes called “phantom income.”
This has triggered backlash from gambling advocates who argue it unfairly taxes players even when they break even. However, the Joint Committee on Taxation projects this change could generate an estimated $1 billion in additional federal revenue.
Sweepstakes casinos under fire
On the state level, several new restrictions come into effect in 2026, targeting online gambling formats like sweepstakes casinos, which allows users to play with virtual coins convertible to real money.
States such as New York, New Jersey, and California have implemented bans on promoting or operating sweepstakes gambling platforms, with California’s ban now in place. Other states, including Michigan, Connecticut, and Montana are reviewing similar legislation.
Efforts to amend the federal tax provision have been introduced but face political challenges. The FAIR Bet Act, supported by representatives from both parties, aims to restore full deduction of losses but has stalled mostly due to Republican opposition.
Based on reporting by Herb Scribner for Axios.
