Trump’s ‘One Big Beautiful Bill’ Creates Phantom Tax on Gamblers — and Could Be an Offshore Operator’s Best Recruitment Tool

A cap on loss deductions looks tidy on a budget spreadsheet — but the knock-on effects for the regulated US market could prove far messier

Buried inside President Donald Trump’s sweeping domestic-policy legislation, popularly dubbed the “One Big Beautiful Bill Act,” is a quiet but consequential change to how American gamblers are taxed. From 2026, bettors will no longer be permitted to deduct 100% of their gambling losses against their winnings when filing federal returns. The new ceiling is 90%. The remaining 10% of losses — money that was genuinely wagered and genuinely gone — will be treated by the Internal Revenue Service as though it never left the bettor’s pocket.

The arithmetic is stark. A recreational sports bettor who turns over serious volume, winning $100,000 across the calendar year but also losing $100,000, finishes the year exactly where they started: net zero. Under the existing rules, that outcome attracts no income-tax liability on gambling activity. Under the incoming framework, the same person would owe tax on $10,000 of what critics are already calling “phantom income” — a notional profit that exists only on the tax form, not in the bank account.

The Joint Committee on Taxation has estimated the provision will deliver roughly $1 billion in additional federal revenue, a figure that makes it an attractive line in a bill that is already straining to balance ambitious spending commitments against fiscal constraints. On that narrow measure, the logic is defensible. Gambling winnings have historically been under-reported, and tightening the deduction regime is a relatively low-friction way to widen the base.

The offshore arbitrage problem

Where the calculation becomes considerably less straightforward is when the regulated market is viewed as an ecosystem rather than a simple revenue tap. Gambling-industry advocates and a growing number of state regulators have begun raising the alarm that the phantom-income provision hands offshore and grey-market platforms an extraordinarily compelling sales pitch — one that no amount of responsible-gambling messaging or sleek app design from licensed operators is likely to neutralise.

The pitch writes itself: stake the same bets, with the same odds, on an offshore book that files nothing with the IRS, and your tax position simply does not change regardless of how your year ends. For a high-volume recreational bettor who is already margin-conscious, that is not a trivial incentive. According to reports, advocacy groups have already begun framing the provision in precisely these terms to legislators, arguing that the $1 billion revenue projection rests on an assumption that bettors will absorb the new cost rather than route around it.

The concern is not merely theoretical. The post-PASPA legalisation wave was built, in significant part, on the argument that competitive pricing and a regulated, trustworthy product would steadily draw action away from the offshore market. Progress on that front has been real but uneven; offshore operators have never fully relinquished their foothold among experienced, value-driven bettors. A structural tax disadvantage attached to the licensed channel risks reversing some of those hard-won gains.

An unintended subsidy for the unregulated

There is a certain irony in the situation. The regulated US sports-betting market generates substantial tax revenue at both state and federal level, funds responsible-gambling programmes, and operates under consumer-protection obligations that offshore sites simply ignore. Legislation designed to extract more revenue from gambling activity could, if the migration effect is significant enough, ultimately reduce the total tax take while simultaneously swelling the ranks of bettors operating outside any regulatory framework whatsoever.

Whether Congress revisits the provision before it takes effect in 2026 remains to be seen. What is already clear is that the gambling industry intends to make the offshore-leakage argument loudly and repeatedly as the bill moves through its remaining legislative stages. For offshore operators, the debate itself may already be doing their marketing for them.

Sources

• Gamblers Face Tax Hit, Less Betting Options in 2026
• FBI Issues Warning About Illegal Gambling Sites