In the span of just a few weeks, state and federal lawmakers from across the U.S. have apparently decided it’s time to squeeze sports bettors and gamblers just a little bit more.
Key Points
- A proposed federal tax change in the “One Big Beautiful Bill Act” would limit gamblers to deducting only 90% of losses against winnings (down from 100%), potentially increasing tax bills even for profitable gamblers. If passed, it could raise over $1 billion in federal revenue over a decade.
- Illinois now charges sportsbooks 25–50 cents per bet, a cost that operators like DraftKings and FanDuel plan to pass on to users starting in the fall via transaction fees, even on bets made with bonuses or those that result in a push.
- New Jersey raised online gambling taxes and passed laws banning proxy betting and possibly criminalizing the use of private information in wagers.
The decision that could have the broadest impact is the amendments recently slipped by the U.S. Senate into President Donald Trump’s baby, the “One Big Beautiful Bill Act.”
That change to the Internal Revenue Code would make it so gamblers can only deduct losses equal to 90% of their winnings, rather than 100%. Gambling-related expenses would now be lumped in with losses as well.
In other words, a gambler who eked out a profitable year could still find themselves in the red come tax time.
Big beautiful billions
The bill was passed Tuesday in the Senate by the narrowest of margins, 51-50. The legislation (which has much, much more in it besides gambling tax changes) will now go back to the House of Representatives, where it likewise passed by the narrowest of margins, 215-214, in May.
Whether the House will consent to the changes remains to be seen, but President Donald Trump will no doubt use the bully pulpit to the fullest on holdouts. If Trump does ultimately sign the proposed tax changes into law, it's estimated the government could raise (and gamblers could cough up) more than $1 billion in additional revenue over the next decade.
NEW: The Joint Cmte on Taxation estimates that the gambling tax provision in the BBB will generate over $1.1 billion in extra revenue off of gamblers over an 8-year period. [Provision 14] pic.twitter.com/6JeuW68Q5q
— Fairplaygov (@fairplaygov) July 2, 2025
Again, it’s not a done deal. But if it is, it won’t be the only significant tax change made this year for gamblers in the U.S.
On July 1, in fact, the new per-bet tax in Illinois began. Now, online sportsbooks in Illinois, in addition to the tax they pay on their revenue, must pay 25 cents per wager for their first 20 million wagers in a year, and then 50 cents for each wager after that.
Bettors in the Land of Lincoln could be blissfully ignorant of this, for now. That’s because sportsbook operators have yet to pass on the cost, but they will.
DraftKings and FanDuel plan to start charging their customers a 50-cent “transaction fee” on all bets starting Sept. 1. Fanatics will charge a 25-cent fee to its bettors this fall as well.
Buried within the BS Republican Budget bill is a provision that harms poker players and those who gamble by limiting loss deductions. I’m working on a legislative fix that fairly treats gaming losses in the tax code.
— Dina Titus (@repdinatitus) July 2, 2025
So, if you use those books, and perhaps others, you’re coughing up an extra quarter or two to make your usual wager. As a result, Illinois lawmakers will have played a role in squeezing sports bettors just a little bit more. And there are additional quirks.
The Illinois Gaming Board explained on June 17 that the per-bet tax will apply to wagers made with "bonus" money awarded by operators, and that, in the event of a push on your bet, the tax will still apply. Voided bets will not be taxed.
What that means, though, is you could push on a bet and still lose 25 to 50 cents. Hypothetically, if you bet the Bears +7 and they lose 21-14, you’ve pushed, your stake is returned, but you could have still paid a transaction fee.
Did Illinois legislators foresee these kinds of costs getting passed on to bettors when they approved the per-bet tax? I don't know, but they did approve the levy, and bettors could now be the ones paying the price.
Broadly speaking
New Jersey is another state that recently decided to ratchet up the tax rate for online sportsbooks, but it also did so for internet casino operators and daily fantasy sports companies. The tax rate for all three forms of online wagering is poised to become 19.75%, up from 13% for sports betting, 15% for iGaming, and 10.5% for fantasy.
Now, New Jersey sports betting sites may not be passing on their increased costs to consumers in the same way as their counterparts in Illinois. But Garden State lawmakers did pass other legislation that could create a different kind of discomfort for some (perhaps sharper) bettors.
Namely, another piece of legislation recently passed by the state legislature, intended to prohibit sweepstakes casinos and sportsbooks, contains provisions prohibiting proxy betting and the use of someone else's sportsbook account.
More confusingly, someone in New Jersey could now be guilty of "swindling and cheating" if they "purposely or knowingly [place] any sports wager having knowledge of information not available to the general public bearing upon that wager and wins, or attempts to win, money or property or a representative of either."
#bettingTwitter: a bill in the NJ legislature seeks to criminalize players even talking to each other before betting (link below). The language is so broad, it could make @JasonKelce guilty of "swindling & cheating" when he gives his pick on his @nfl pregame show @OLS_LegInfo…
— Joe Brennan Jr (@joebrennanjr) June 30, 2025
I'm not a lawyer. However, my reading of the above makes me think it refers to a situation like this: Player X telling Bettor Y, “Hey bud, look, I’m sick tonight, take my Under.”
But also… “knowledge of information not available to the general public bearing upon that wager” is a broad phrase. If I built a good sports betting algorithm (I haven’t) that I and I alone use to make massive wagers, is that information “not available to the general public” and "bearing upon that wager"? I personally would say no, because it’s probably built on stats available to everyone. But it’s also possible that other people read the law differently.
Furthermore, you could argue that the anti-proxy betting measures are in there to protect operators from "syndicates" swooping in and cleaning up. But I think you could also argue that if you and a sportsbook-less friend go halfsies on a $1,000 bet, it wins, and you split the winnings, you’ve now committed "a disorderly persons offense."
The last two days as a professional gambler have been my WORST since UIGEA was snuck into the Safe Ports Act in 2006.😔
— Captain Jack Andrews (@capjack2000) July 2, 2025
We used to be considered self-employed small business owners. Now we’re being treated as criminal second-class citizens.
Disgusting.😡
Alarm bells are being rung about all of the above, such as the business that could be driven to “unregulated” operators and federally regulated prediction markets that don’t pay state sports betting taxes.
But “Captain” Jack Andrews, a professional bettor and co-founder of sports-betting education site Unabated, summed it up this way on X:
“The last two days as a professional gambler have been my WORST since [the Unlawful Internet Gambling Enforcement Act] was snuck into the Safe Ports Act in 2006. We used to be considered self-employed small business owners. Now we’re being treated as criminal second-class citizens.”
