The utter absurdity of the new tax law, just when we thought they had fixed the broken old one, what now?
It was new tax laws that killed the major farms from the glory days of racing, you remember the ones that bred to race and didn’t sell, the best horses that money couldn’t buy because there wasn’t a single hair to buy
There’s a special kind of arrogance that only comes from Washington when lawmakers start tinkering with gambling laws they clearly don’t understand. And the One big, beautiful bill– the OBBBA, signed on July 4, 2025 – is perhaps the most stunning example of that ignorance in years. Deep within the fireworks and flag waving was a ticking time bomb: A 90% limit on the deduction of gambling losseswhich comes into effect from January 1, 2026.
The government somehow managed to reinvent the concept of ‘income’ into something only a bureaucrat could love: phantom gain– money that you never actually kept, but on which you still owe taxes.
For decades, the rules were strict but fair. If you won money, you paid taxes. If you have lost money, you can deduct these losses up to your winnings. Simple. Symmetrical. Logically.
That logic is now dead.
The math that even a politician cannot defend
Let’s summarize this the way a gambler does, not the way a congressional staffer who has never played a $5 blackjack hand imagines it working.
Suppose you win $100,000 and lose $100,000 over the course of a year. You even broke. Zero. A wash.
According to the old rules?
You deducted the €100,000 and your taxable gambling income was €0.
Under the new 2026 rule?
You may only deduct 90% of your losses:
- Gain: $100,000
- Allowable deduction: $90,000
- Taxable “income”: $10,000
You owe tax on it ten thousand dollars you never earned. I know, it’s hard to keep a straight face.
And it ends in madness.
A high-volume professional gambler who turns over $5 million, winning $5 million and losing $5 million, is now hit with a $500,000 taxable event on what is in reality a net profit of exactly zero.
This is not a taxation; it’s extortion via spreadsheets.
Micro Events vs. Macro Reality: Where the IRS Still Doesn’t Get It
Here’s the problem: gamblers move on sessions And bankroll cyclesnot with every spin or every punch of a card.
Put $100 into a slot machine, grind for hours, produce $5,000 in “winnings” and walk away losing $100.
Reality: You lost a hundred dollars.
IRS 2026 Reality: You had an income of €5,000, but you are only allowed to deduct €4,500.
Now you owe taxes on a losing session.
If any other industry were told they could only deduct 90% of the cost of goods sold, Congress would be tarred and feathered on the Capitol steps tomorrow morning. But gamblers? We are a politically safe punching bag.
Washington wants a risk-free partnership:
You take the risk, they take the rake.
Who gets hurt? Anyone who actually plays this game
The hobbyist
Already buried under a high standard deduction – now hit with phantom income despite losing money. The tax authorities have discovered how to tax heartbreak.
The professional
The people who get a 1 to 2% ROI – sharp gamblers, poker pros, blackjack counter teams – are about to be eliminated. A 10% phantom load not only destroys their lead; it pushes them to negative ROI overnight.
The US will lose legal professionals to offshore markets faster than regulators can pretend to “study the issue.”
The political battle: ugly, bipartisan and heating up
The gambling world did something rare in 2025: it united. Players, casinos, ADWs, racetracks and the American Gaming Association came out swinging.
And it is thanks to that pressure that we are where we are from late 2025 – early 2026:
1. The FAIR BET Act (HR 4304) – The Key Momentum to Undo the Damage
Rep. Dina Titus (D–NV) introduced it within weeks of signing OBBBA. It fully restores the 100% deduction.
From December 2025:
- It has more than 70 bipartisan cosponsors,
- The House Ways & Means Committee held a preliminary hearing,
- And the bill is scheduled for a markup window early 2026.
2. The WAGER Act – The Republican counterpart
Heavily backed by casino state Republicans. It achieves the same repeal, but also proposes to index gambling loss rules to inflation. This is one of the rare fights where everyone agrees that Washington screwed up.
3. The new Senate bill (introduced in December 2025)
Senator Catherine Cortez Masto (D–NV) and Senator Todd Young (R–IN) jointly filed the Senate version.
The twofold message was loud and clear:
“If a taxpayer didn’t keep the money, the IRS shouldn’t tax it.”
Finally, some logic on Capitol Hill: mark your calendars.
4. The Treasury Department’s November 2025 ‘Interpretation Memo’ (Made Things Worse)
The Treasury has released guidance tightening the definition of ‘session reporting’, potentially requiring even more detailed documentation for gamblers.
Translation:
They doubled down on the misunderstanding of how gambling works.
5. The 2026 budget reconciliation framework
Buried in the early version (released January 2026) lies a amendment to postpone the limit until 2027.
Don’t withdraw, but postpone.
Politicians love the slow walk. Delayed pain is still pain being delivered.
What happens now?
If Congress does not pass the repeal by mid-2026, gamblers will be hit with the most absurd tax rule that sports, casinos and gamblers have ever seen. The AGA, the Nevada delegation, tribal interests, racing groups and even the online sportsbooks are pushing hard — but Washington relies on political urgency, not logic.
And gamblers are not a voting bloc. We are an ATM.
Bottom line: The house always wins… and now the IRS wants a seat at the table
This 90% limit on the loss deduction not only leads to a misunderstanding of gambling, but also eliminates the fundamental fairness that the tax code has relied on for decades. It fabricates revenue, ignores math, punishes the people who actually participate in legal betting, and threatens to push an entire swath of the industry offshore.
If you tax money that the gambler never kept, you cross a moral line.
You steal.
And right now, unless Congress changes course, Washington is bracing for the biggest heist the gambling world has ever seen. Add this to the CAWs and all the other “issues” the game faces and it looks like 2026 will be a very interesting year in the history of the Sport of Kings.
#phantom #income #trap