While federal lawmakers begin the process of trying to roll back a controversial change to the amount of losses gamblers can annually deduct on their taxes, their state-level counterparts hope for a solution to keep the industry thriving for their budgetary needs.
The so-called “One Big Beautiful Bill Act” pressed through Congress by Republican majorities and signed by President Donald Trump on July 4 reduced the amount of claimable losses from 100% to 90%, creating the potential for gamblers to owe taxes even if they have a net losing year.
Nevada Democratic Rep. Dina Titus introduced the FAIR BET Act in the House of Representatives on Monday, and Nevada Democratic Sen. Catherine Cortez Masto introduced the FULL HOUSE Act on Thursday, both of which would return the amount to 100% of losses.
The Senate bill failed to achieve unanimous consent, however, meaning it must now take a slower, more traditional route toward passage.
Industry wants Trump budget tax rolled back
At the National Council of Legislators from Gaming States (NCLGS) Summer Meeting in Louisville, Kentucky, this week, taxation of operators on the state level and bettors on the federal level are popular topics.
West Virginia state Delegate and NCLGS President Shawn Fluharty called the federal move a “step backward,” pointing to a tax rate tweak in West Virginia in 2023 that was made retroactive to 2020.
“This is going to, I think, take people from the regulated market and potentially open up the doors for the unregulated black market,” he said. “I just think it’s a step backward.”
Prime Sports co-founder Joe Brennan Jr. believes lawmakers found a target in gamblers — particularly professionals — that most people are reluctant to defend.
“I think that it was an intention, knowing how the budgetary process works … a million dollars was taken out over there, so they had to find a million dollars over there,” he during a panel discussion at NCLGS. “And some staffers said, ‘Why don’t we hose the gamblers first?’ I think, though, what it points out is that we still have some cognitive dissonance, whether it’s at the federal level, or even in the states.
“A New York lawmaker introduced a bill to reduce state tax deductions for home losses to zero. You shouldn’t be subsidizing these players? Why not? Those players are gambling, and they’re creating quite a lot of revenue for you guys — 51 percent off the top.”
Brennan Jr. noted that even though lawmakers are comfortable legalizing and taxing gambling, “they’re still, for some reason, punitive toward gamblers in a way that we’re not punitive towards people who speculate and [play the stock market].
“Even crypto bros who buy Dogecoin and lose their butt deduct 100% of their losses. How are they less of a gambler than a poker player, a sports bettor, or a fantasy sports pro?”
Nevada fought back in haste against tax change
Fluharty was encouraged that two federal legislative responses came so quickly.
“I think it shows you for something that, quite literally, the ink wasn’t dry yet,” he said, “they’re already saying, ‘Whoops, we had this in there and we didn’t really know the ramifications of it.’ It tells you how important it is and how many of [Titus’] constituents coming from Nevada reached out to her.”
Fanatics Betting & Gaming Vice President of Government Affairs Brandt Iden, a former Michigan legislator, thought the implications of the change on the gambling industry were overblown.
“I saw a stat that said only 10% of Americans that file federally file a line-item deduction under the new rules in place,” he said. “So really what you’re talking about is the 10% of those filers that then have gambling deductions, which I’m sure is another lower percentage that actually use that deduction line item.
“So I don’t know that it will have the effect that I saw it have over the weekend when the media was reporting on it. That said, I’m not a tax expert.”
Iden, like Fluharty, took it as a positive sign that two bills had already been filed.
“One of the key important things is you’ve already seen legislation be introduced, you’ve got the rest of this year to correct it, and you have all of next year before those filers would actually file in April of 2027,” he noted. “The bill doesn’t go into effect until Dec. 25 of this year. Then it’s all of next year, and you can still correct it from a tax perspective before people actually had to file in April of 2027 for their earnings in 2026. So I think that there’s a year and a half to still correct the issue, which is a lot of legislative runway to fix the problem.”
But there’s no time for dawdling, Fluharty said.
“This needs to be fixed and I’m confident that it will be, but there’s a timeline issue,” he warned. “Things move very slowly at the federal level.”
