The One Big Beautiful Newsletter
A new cap on gambling loss deductions included in the One Big Beautiful Bill was all anyone could talk about this weekend, but how bad is it really?
The Bulletin Board
THE LEDE: Big Beautiful Bill limits gambling loss deductions.
BEYOND the HEADLINE: The precedent for capping gambling loss deductions.
ROUNDUP: Fanatics adds per-wager fee; M&A news; AZ bans bulk lottery purchases; PA considers raising iGaming taxes.
QUICK HITTER: FanDuel adds to its national lobbying team.
NEWS: California AG takes on the DFS industry.
AROUND the WATERCOOLER: Betting integrity scandals.
STRAY THOUGHTS: Playing catch-up.
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The Lede: Big Beautiful Bill Limits Gambling Loss Deduction
As I suspected it would happen, all hell broke loose while I was on vacation.
President Donald Trump’s “One Big Beautiful Bill” has sent shockwaves through the gambling world with a contentious amendment that could significantly impact professional and some recreational bettors.
On July 1, 2025, the Senate passed a nearly 1,000-page version of the bill that included a previously unknown provision (that seems to have originated in a Senate Finance Committee report authored by Sen. Mike Crapo in mid-June) limiting gambling loss deductions to 90% of winnings. A change that takes effect in 2026 and is projected to raise $1.1 billion over eight years.
The House concurred on July 3, and President Trump signed the bill on July 4.
The simple breakdown is as follows: A break-even gambler — winning $100,000 but losing $100,000 — would owe taxes on $10,000 of phantom income. However, gambling tax expert Russell Fox put things into proper perspective and offered some ideas on how gamblers can protect themselves from incurring unnecessary taxes (session logs instead of a yearly tally).
Fox also offered his views on X on how the law could be reversed. More on that in a moment.
After reading through several articles and expert commentary, I would argue that this change would be detrimental to a small minority of gamblers who bet large sums and win while having a minimal impact on the other 99%+ of gamblers, most of whom don’t itemize gambling wins and losses — I’ll deep-dive this for Friday’s feature column.
And to keep things light:
The amendment sparked immediate backlash on social media from professional gamblers and poker players. Professional poker player Phil Galfond warned on X that it “would end professional gambling in the US,” potentially pushing bettors to unregulated offshore platforms.
However, the response of the average X user (based on a retweet from Nate Silver, whose following is less gamblers-heavy) indicates that the vast majority of people like the policy or think it doesn’t go far enough as they view the deduction as subsidizing people’s gambling.
Nevada Rep. Dina Titus vowed to fight the provision, arguing it could devastate Nevada’s tourism-driven economy and drive gamblers to black markets. Titus said she plans to introduce a separate bill if the House doesn’t remove the clause.
Titus later tweeted she would be introducing the FAIR BET Act on Monday. “The Fair Accounting for Income Realized from Betting Earnings Taxation Act, to permanently restore the 100% loss deduction from gambling winnings.” She has also recruited Rep. Ro Khanna to cosponsor the bill.
An interesting sidebar to this is whether prediction markets will benefit:
As Citizens wrote in a note:
“Avoiding taxable losses can now be added to the list of better pricing and cashout for reasons that a sophisticated cohort (VIP, sharp, whales, professionals) could use the offering.
YTD, legislative changes, including tax changes to the operators and now players, only support the thesis that traditional gaming companies will heavily invest in prediction markets when officially legalized.
We have already baked in ~$50M startup costs into our DKNG and FLUT models for next year under the assumption predictions will launch in 2H25.”
However, as Dustin Gouker noted on X, bettors could be playing with fire if they travel down this road:
“Before everyone starts doing all their gambling at prediction markets, realize that something's legal status doesn't always correlate with how it's taxed. To wit, DFS is "not gambling" everywhere it's offered, but you are supposed to claim it as gambling.
“Talk to an accountant.
“Can you make a case that it's not gambling income? Sure. Is that written in stone? Absolutely not.”
Beyond the Headline: Gambling Tax Change Has Precedent
Gamblers have been able to itemize losses up to their winnings since the passage of the 1934 Revenue Act, but only a tiny percentage do.
Since only those who itemize can deduct gambling losses, the actual number of filers itemizing gambling deductions is a small subset of total filers (particularly after the standard deduction was doubled in the 2017 Tax Cuts and Jobs Act (TCJA).
According to the most recent available data from the IRS (2020), approximately 662,000 tax filers claimed gambling losses as itemized deductions out of 161 million tax returns filed, or about 0.4% of all tax filers.
Further, a percentage cap on deductions isn’t some weird anomaly:
Business meals, 50%
Excess business interest, 30%
Entertainment expenses, 0% (since 2017)
The best analogy is that since the 2017 TCJA, net operating losses (NOLs) can no longer be wholly offset against income. Businesses can deduct NOL only up to 80% of taxable income (determined without the NOL deduction) in a given year.
The NOL limitation mirrors the impact of the gambling tax on taxable income. Despite no economic gain, it applies percentage-based caps on business losses (80%) vs. gambling losses (90%). A business with an NOL, like a bettor, faces taxes on income that doesn’t reflect their true financial position, with one significant difference: carryforwards for NOLs vs. no carryforward for gambling losses.
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Roundup: Fanatics Per-Wager Fee; M&A News; AZ Bans Bulk Lottery Purchases; A Tax Hike Coming to PA
Fanatics will apply a $.25 per-wager surcharge in Illinois [InGame]: Fanatics Sportsbook will impose a $.25 per-wager surcharge in Illinois in the fall, in response to the new per-wager tax ($.25 per bet for the first 20 million wagers and $.50 thereafter) Illinois imposed earlier this year. Unlike FanDuel and DraftKings’ $.50 surcharge, Fanatics’ is unlikely to cross the $.50 threshold, allowing Fanatics to keep the surcharge at $.25 and perhaps enticing bettors with a lower fee.
Apollo receives the go-ahead to acquire IGT and Everi [CDC Gaming Reports]: The Nevada Gaming Control Board has approved Apollo’s acquisition of IGT and Everi for $6.3 billion. The deal will bring the companies under Apollo’s roof. Per CDC Gaming Reports, “The deal allows Apollo, owner of the Palazzo, Venetian, and Venetian Expo in Las Vegas, to acquire IGT’s gaming and digital business and Everi and combine them into a single enterprise. Apollo said the company will explore an IPO in the future with the new IGT, possibly in the next three to five years.”
Bally’s offloads Gamesys to Intralot [Press Release]: Bally’s sold its digital assets (namely Gamesys) to Intralot for $1.6 billion cash and $1.2 billion in shares, which would make Bally’s the majority shareholder of Intralot. The sale, led by Bally’s Chairman Soo Kim via Standard General, will help Bally’s focus on its $1.7 billion Chicago casino. Bally’s acquired Gamesys in 2021 for $2.7 billion during the height of the mobile sports betting craze in the US.
Arizona is the latest state to ban bulk purchases of lottery tickets [Lottery Geeks]: Following the lead of Texas, “The Arizona Lottery recently updated its rules to include a ban on bulk purchases of lottery tickets… per the Arizona Lottery’s official website, [a bulk transaction] occurs when any individual, group, or entity purchases, in aggregate, Fast Play tickets exceeding $50,000 within a twenty-four (24) hour period.”
Operators rally opposition to a yet-to-be-revealed tax increase in PA [Sports Betting Alliance]: A new call to action from the Sports Betting Alliance points to a potential tax increase on mobile sports betting and/or online casinos in the state: “Right now, some Pennsylvania lawmakers may be considering a tax hike on online betting, including sports wagering, table games, and slots. With unfair tax hikes like this, everyone loses—but especially customers!” Pennsylvania already has very high tax rates, but the state does allow for promotional deductions (which STTP previously pointed to as a reason to watch Pennsylvania), which significantly reduce operator tax obligations.
Quick Hitter: National Lobbying Continues to Ramp Up
Last month, news broke that DraftKings had established a political action committee (PAC). Now, FanDuel is expanding its national lobbying presence as the industry navigates the challenges presented by the One Big Beautiful Bill, the SAFE Bet Act, prediction markets, and other federal legal and regulatory developments.
Per a press release, FanDuel has appointed Shailagh Murray as Senior Vice President of Public Affairs and Jonathan Nabavi as Vice President of Federal Affairs.
Following a six-year stint in the Obama White House, where she served as Vice President Biden’s deputy chief of staff and communications director, and then as Senior Advisor to President Obama from 2015 to 2017, Murray went on to serve as the Executive Vice President of Public Affairs at Columbia University.
Nabavi joins FanDuel from the National Football League, where he was responsible for all aspects of the NFL’s public policy and legislative agenda and represented the League on a wide range of issues before the US Congress, the White House, other federal and local government agencies, as well as with foreign governments and international institutions.
News: California AG Takes on Daily Fantasy Sports
California Attorney General Rob Bonta issued a 33-page opinion on the legality of daily fantasy sports in the state, and the tl;dr for DFS operators is that the opinion isn’t positive.
Bonta’s office was tasked with answering the following question at the request of lawmakers (the request dates back to 2023 — see previous STTP reporting):
“Does California law prohibit the operation of daily fantasy sports games with players physically located within California, regardless of whether the operators and associated technology are located outside the State?”
Deputy Attorney General Karim J. Kentfield’s answer was:
“Yes, California law prohibits the operation of daily fantasy sports games with players physically located within California, regardless of where the operators and associated technology are located. Such games constitute wagering on sports in violation of Penal Code section 337a.”
So what does this mean?
Tribes want enforcement:
"While the California Nations Indian Gaming Association (CNIGA) commends Attorney General Rob Bonta for standing up for the rule of law in California, it is also very clear that California has long turned a blind eye to illegal gambling—at the direct expense of tribal governments… Where is the enforcement? Where is the accountability? It is now imperative that the state back up this legal opinion with strong enforcement and that lawbreakers be held to account." James Siva, CNIGA Chairman
In the short term, I suspect very little will change.
We witnessed this exact scenario unfold numerous times between 2015 and 2016. There will likely be lawsuits (Underdog, a newsletter sponsor, has already filed suit) and possibly legislation. For now, it doesn’t appear that any operators will withdraw from the state (as I mentioned earlier, DFS operators cannot afford to lose California), as AG opinions are merely opinions and not binding as law.
There are also some influential voices of dissent. "The Attorney General, in his independent capacity, issued this opinion — not the Governor’s office," Izzy Gardon, a spokesman for Gov. Newsom, told KCRA.com. "While the Governor does not agree with the outcome, he welcomes a constructive path forward in collaboration with all stakeholders."
FanDuel and DraftKings issued similarly worded statements on the opinion:
DraftKings respectfully disagrees with the interpretation expressed with respect to peer-to-peer fantasy sports contests in the non-binding advisory opinion issued by the Attorney General of California… We intend to work with stakeholders, including the Office of the Attorney General, to try to find an amicable resolution.” ~DraftKings
“We look forward to meeting with the Attorney General’s office to talk through our next steps.” ~ FanDuel
JT Foley, Executive Director of the Coalition for Fantasy Sports, issued a statement that reads in part:
"We agree with Governor Newsom — AG Bonta got it wrong… The law has not changed, a fact the last two Attorneys General, Kamala Harris and Xavier Becerra, recognized as they specifically declined any similar action. We are hopeful the Attorney General heeds the Governor's call to find a constructive solution that preserves the games that California sports fans love.”
STTP suspects that a compromise will be reached that allows for peer-to-peer DFS contests, with against-the-house versions prohibited. The opinion doesn’t make a legal distinction between the myriad DFS offerings. Of note, PrizePicks shifted its California offerings to its P2P Arena games in the lead-up to Bonta’s opinion.
As Victor Rocha said on X, the DFS opinion is an opportunity to redefine the industry:
Around the Watercooler
Social media conversations, rumors, and gossip.
Not one but two betting integrity scandals broke while I was on vacation:
Yes, legalization played a critical role in uncovering these scandals. That said, added attention is the last thing the industry wants.
I’ve said many times that unwanted attention is the fastest way to get unwanted federal attention. As I wrote in June 2024:
I’ve been sounding the federal oversight klaxon for several years. It’s a topic I first broached in 2018 when Senators Orrin Hatch and Chuck Schumer proposed a federal sports betting oversight bill.
In 2023, I revisited the topic following the introduction of Rep. Paul Tonko’s sports betting advertising bill, writing:
“The more attention sports betting and online gambling receive (positive or negative), the more likely Congress will jump into the conversation. And that is not something anyone should take lightly.”
I also very much agree with David Purdum’s take on this:
Purdum and I discussed this very thing during his podcast appearance in March 2025:
Stray Thoughts
After a week off, the newsletter will be playing catch-up this week, so bear with me if any entries seem slightly dated.