Editor
The so-called One Big Beautiful Bill Act (OBBBA), endorsed by President Donald Trump, will have far-reaching effects in the United States, but one passage in particular has become the focus of the poker and gambling world. The language in question would limit gamblers to using only 90% of their gross losses to offset gross winnings for tax purposes. Under current law, federal income tax is applied only to net winnings—that is, gross winnings minus 100% of gross losses.
The poker world became aware of that clause on Tuesday, sparking widespread alarm on social media. Professional gamblers have been struggling to determine what the impact would be on their bottom lines, but there are some ambiguities regarding how the law would be applied.
Section. 70114 of the bill states:
(a) In General.–Section 165 is amended by striking subsection (d) and inserting the following:
(d) Wagering Losses.–(1) In general.–For purposes of losses from wagering, transactions, the amount allowed as a deduction for any taxable year–
(A) shall be equal to 90 percent of the amount of such losses during such taxable year, and (B) shall be allowed only to the extent of the gains from such transactions during such taxable year.
(2) Special rule.–For purposes of paragraph (1), the term losses from wagering transactions includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction..
(b) Effective Date.–The amendment made by this section shall apply after December 31, 2025.
That provision exists only in the Senate version of the bill, which passed narrowly on July 1. Its fate in the House of Representatives is still to be determined, as a small number of Republicans remain opposed. An attempt to use a procedural vote to block its introduction failed on July 2, after long delays.
Nevada Congresswoman Dina Titus has said she will introduce an amendment to strike that provision from the bill. So, even if it passes, the final version may not include the change to the gambling tax code.
Actual Impacts Will Depend on Accounting
On the surface, the language seems simple enough, permanently limiting the deductible to 90% of gross losses. However, it introduces ambiguities regarding when those losses are calculated.
No matter the interpretation, the impact will be significantly negative for winning gamblers, while turning break-even gamblers into losers. Under current law, if a gambler wins $5.2 million in a year and loses $5 million, they would pay taxes on $200,000 in net winnings. Under the proposed law, the deduction would be only $4.5 million, leaving the gambler to pay taxes on $700,000 in winnings. For slight winners, the taxes might even exceed their net winnings, leaving them in the red at the end of the year.
The most worrisome aspect of this is that the impact can vary hugely depending on the frequency of accounting. For instance, consider the following scenario:
- A player arrives at the casino, buys $50,000 in chips, and proceeds to the blackjack table.
- The player plays ten hands of blackjack at $10,000 each, winning seven and losing four for a net win of $30,000.
- Now with $80,000 in chips, the player goes to the roulette table and places a single $30,000 bet, which loses.
- The player cashes out their chips, receiving $50,000 back in cash.
The law is unclear as to whether the accounting of “gross losses” would be for the visit as a whole, for each game, or for each bet.
- Per-visit accounting would mean the player walked away with no winnings or losses and would owe no tax.
- Per-game accounting would mean they would be considered to have won $30,000 and lost $30,000, and would owe taxes on $3,000 in “gross winnings,” despite having broken even.
- Per-bet accounting would mean they won $70,000 and lost $70,000, and would owe taxes on $7,000.
PokerStars Kentucky Lawsuit Provides Grim Example
Depending on how fine-grained the accounting is, the consequences could be devastating for high-frequency forms of gambling, such as cash game poker. It could be dangerous to assume that the IRS would consider winnings and losses on a daily, monthly, or session basis. At the state level, there’s already one example of authorities reckoning poker losses at the hand-by-hand level.
That example comes from the lawsuit the state of Kentucky filed against PokerStars for its activities there before it was forced out of the US market in 2011. PokerStars turned over hand history data, and state prosecutors combined the gross losses of every losing hand played by a Kentucky player when asking for damages.
In other words, if two Kentucky players traded the same $10 back and forth ten times over the course of a cash game, that was considered to be $100 in losses for each of them. The resulting judgment against PokerStars was for more than a billion dollars. Its current owner, Flutter, managed to reduce the amount to $300 million in a settlement after acquiring the company.
Applying similar logic to individual players for tax purposes would make cash games unviable. The accounting for tournament play is comparatively straightforward, but it would force players to focus on longer, larger events where higher ROIs are possible. Single-digit ROIs would become net losses after taxes.
Reaction From the Poker World
The prospect of this bill passing in its current form is particularly devastating to high roller professional poker players, many of whom reacted in dismay on X:
- High-roller poker player Chris Brewer said, “It was fun having a job,” and “I mean this is a death sentence,” in separate posts.
- ACR team pro Ron Kuhn said, “This would essentially eliminate tournament grinders, Jesus.”
- Poker pro Brock Wilson said, “Sent a letter to my representative, that’s terrifying if passed.”
Many poker pros urged people to contact their representatives to prevent the bill from passing or to remove the gambling portion. Phil Galfond, Derek Kwan, and Matt Glantz were among the most prominent commenters, providing details on how to fight back.
That Black Friday Feeling All Over Again
Older poker players are particularly wary of this bill addendum because their memory of April 15, 2011, is still fresh. That date is still infamously known as “Black Friday,” as it marks the day all online poker in the USA vanished in an instant, leaving many players’ livelihoods in limbo.
The case of United States v. Scheinberg was a criminal case against the founders of the three largest online poker communities: PokerStars, Full Tilt Poker, and Cereus. Coinciding with the indictment, poker players woke up to find the sites of those three companies offline, as the Department of Justice had seized their domains.
The road to Black Friday began in 2006 with the enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA). The gambling tax clause in the OBBBA is reminiscent of that because lawmakers likewise slipped UIGEA through as part of a must-pass omnibus bill related to port security. UIGEA sought to take down online gambling by prohibiting third-party businesses from “knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”
Moving money onto and off poker sites immediately became more difficult. Nonetheless, only PartyPoker left the market in response. Those other three large poker sites continued to operate despite UIGEA, assuming that the skill element would make poker exempt, until Black Friday proved otherwise.
If it passes, and depending on how the accounting is interpreted, the tax change could have an equally devastating impact on the poker world.
Fight Back and Mainstream Attention
The most frustrating part, for many, is that it seems to be coming out of the blue, like UIGEA and Black Friday. X user “GregJC17” had this to say in response to Galfond’s post outlining the bill.
Why is it always a last minute add on just before a vote that fucks over gamblers? This is such a ridiculous tax law change. No one will try to take it away because not enough people will be affected by it. Those who are, get royally screwed
He outlines the worry that many in the poker world have. Although now widely discussed in gambling media, the provision may not receive sufficient mainstream coverage or public sympathy to be amended out before the bill passes.
Fortunately, gamblers are not entirely without their champions in this fight.
Popular political commentator and streamer Tim Pool brought it to the attention of his 2.4 million followers on X.
The quick reaction from many did seem to spur some action, as Titus soon jumped in and pledged to fight the segment of the bill. The impact would be particularly close to home for her constituents, as higher taxes on gambling would undoubtedly have a chilling effect on Las Vegas tourism.
Image Credit: Gage Skidmore via Wikimedia Commons (license)
