The One Big Beautiful Bill Act (OBBBA) includes a tax provision that has alarmed American Bettor’s Voice (ABV), a nonprofit advocating for professional and recreational sports bettors. ABV warns the rule, which limits deductions for gambling losses, could drastically harm the regulated U.S. sports betting industry and push bettors away from licensed operators.
In a recent paper titled The OBBB Gambling Tax Provision: An Existential Threat to Regulated Sports Betting, ABV board member Adam Robinson explains how the bill’s language would tax bettors on money they never actually won, disrupting both bettors and sportsbooks.
Phantom Income Tax Could Hurt Bettors and Operators
The OBBBA’s Senate version restricts gamblers to deducting only 90% of their wagering losses annually. This means bettors would owe taxes on “phantom income” — money they never earned from gambling.
“Professional bettors, who typically operate on thin margins with high volume, face economic devastation under these rules [OBBBA],” Robinson said.
This tax change overturns a long-standing rule from the Revenue Act of 1954 that allowed full loss deductions against gambling winnings, aiming to generate roughly $1.1 billion in federal revenue over eight years.
Bill Could Cost Industry Billions in Revenue and Taxes
ABV projects that the tax provision could result in losses of $18 billion annually in betting handle, along with $1.5 billion in gross gaming revenue and $420 million in lost state tax revenue. More severe scenarios show losses topping $48 billion.
States like New York, Illinois, Pennsylvania, New Jersey, and Ohio would be especially vulnerable due to bettor migration away from regulated platforms.
For instance, New York might lose about $129 million annually in tax revenue based on its recent betting handle and tax rates. Illinois could see a tax loss of $41 million, not counting its new per-wager tax.
Major operators are at risk too: FanDuel could lose between $7.2 billion and $19.2 billion in handle, while DraftKings faces a potential loss of $6.2 billion to $16.8 billion. Even PENN’s $2.1 billion deal with ESPN could be in jeopardy due to expected customer losses.
The provision could also deter high-volume recreational bettors, who supply steady revenue to sportsbooks but don’t rely on betting for income. Robinson said the tax change turns betting entertainment into a “tax planning nightmare,” threatening to push these bettors away.
“Their departure would force fundamental changes to business models built around serving this affluent, entertainment-focused demographic,” Robinson noted.
Prediction Markets and Offshore Books May Gain Users
With increased tax burdens, bettors might turn to prediction markets such as Kalshi, regulated by the Commodity Futures Trading Commission (CFTC), which allows 100% loss deductibility. These platforms offer nationwide access and lower age limits, making them appealing alternatives.
One professional bettor reportedly wagered over $1 million on Kalshi during a college football Saturday, according to ABV.
Prediction markets also avoid many state-level regulations and restrictions, including limits on winning players—advantages that may lure bettors away from traditional sportsbooks.
ABV warns that unless the OBBBA tax rules are adjusted, these shifts could weaken the regulated sports betting market and benefit less transparent alternatives.
Source:
“Gambling tax deduction paper projects $18B handle losses for sportsbooks”, sbcamericas.com, October 6, 2025
The post New Tax Rule Could Drain $18B from Regulated Sportsbooks, Says ABV first appeared on RealMoneyAction.com.