Feb. 4 at 1:35 PM
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As of January 1, 2026, a provision in the Republican-led "One Big Beautiful Bill Act" reduced the gambling loss deduction to 90%, forcing bettors to pay taxes on "phantom income". This change incentivizes shifting funds to regulated prediction markets, which may offer more favorable tax treatment (60/40 capital gains) compared to traditional sports betting.
Key Details on 2026 Gambling and Prediction Markets:
Reduced Deduction: The 10% reduction in allowed gambling loss deductions applies to sports betting, casinos, and horse racing, significantly affecting high-volume bettors.
Prediction Market Advantage: Platforms like Kalshi, Polymarket, and new,, DraftKings Predictions operate under CFTC regulation rather than state gaming laws. They may be taxed as Section 1256 contracts (60% long-term, 40% short-term), allowing for better loss offsets than the new 90% gambling rule.
Legislative
