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The American Bettor’s Voice (ABV) has raised alarms about a provision in the One Big Beautiful Bill Act (OBBBA) that could significantly impact professional gamblers. Adam Robinson, a board member of ABV, has authored a paper outlining how this legislation might adversely affect how losses are deducted, ultimately costing sportsbooks an estimated $18 billion in handle losses.
In his paper titled “The OBBB Gambling Tax Provision: An Existential Threat to Regulated Sports Betting,” Robinson details the potential fallout for both bettors and the regulated gaming market in the US.
As a non-profit organization advocating for sports bettors, ABV aims to shine a light on these concerns. Led by CEO Richard Schuetz, the organization includes prominent figures in the gambling industry, such as professional gamblers Gadoon “Spanky” Kyrollos and Billy Walters.
How does OBBBA affect the gaming industry?
Under the Senate version of the new act, significant changes have been made to the way gambling losses are deducted, with gamblers now likely to face taxation on more than just their net winnings.
Specifically, the OBBA stipulates that only 90% of a gambler’s total losses within a taxable year can be claimed as a deduction.
ABV argues that this provision creates ‘phantom income,’ which means that some bettors may find themselves liable for taxes on money they never actually won, placing an undue burden on those who gamble.
Potential $1.5 billion in gross gaming revenue decline
According to the ABV, the OBBA will shake up America’s gaming industry in a major way, with projections indicating significant financial repercussions. The organization claims that only a mere 10% of bettors account for 80% of the industry’s betting handle.
“The industry faces $18 billion in annual handle loss, $1.5 billion in gross gaming revenue decline and $420 million in state tax revenue reduction. More severe scenarios project handle losses exceeding $48 billion annually,” continued Robinson.
The states of New York, New Jersey, Pennsylvania, Ohio, and Illinois could experience notable revenue losses as bettors migrate away from regulated platforms due to the OBBA.
In New York alone, ABV estimates a conservative annual tax loss of $129 million, based on last year’s betting figures and the state’s 51% tax rate. Similarly, Illinois could see an annual tax hit of $41 million, factoring in its sliding scale structure and the expected handle for 2024. This estimate does not account for the newly implemented per-wager tax in the state.
The OBBA’s provisions might also threaten the financial stability of major operators. ABV anticipates that FanDuel could lose between $7.2 billion and $19.2 billion in total betting handle due to customer migration linked to the deduction changes.
DraftKings faces a similar risk, with an estimated potential handle loss ranging from $7.2 billion to $19.2 billion. Additionally, PENN’s relationship with ESPN may be at risk, as the company’s ESPN Bet holds about a 2.35% market share. The potential loss of customers could lead ESPN to consider invoking its termination rights the $2.1 billion deal.
Prediction markets might be the future
As concerns grow around the OBBBA’s impact on gambling loss deductions, the ABV anticipates that bettors will increasingly turn to alternative options, particularly prediction markets.
These markets, regulated by the Commodity Futures Trading Commission (CFTC), allow for 100% loss deductibility and operate under more favorable tax conditions compared to traditional sportsbooks.
Robinson pointed out, “These customers have immediate escape routes: prediction markets regulated by the Commodity Futures Trading Commission (CFTC), which maintain 100% loss deductibility and operate under more favorable tax frameworks and offshore sportsbooks.”
The appeal of prediction markets extends beyond tax benefits, they are not subject to the OBBBA’s phantom income taxation, making them attractive for both professional gamblers and high-volume recreational bettors.
For instance, one professional bettor shared with ABV that they had spent over $1 million using prediction markets like Kalshi during a busy college football Saturday earlier this year.
Moreover, the accessibility of prediction market platforms across the country could draw bettors away from regulated sportsbooks. Robison explained, “Prediction markets offer operational advantages that extend beyond favorable tax treatment,” continued Robinson. “CFTC regulation enables 50-state operation versus state-by-state licensing for sportsbooks. Age requirements drop to 18+ versus 21+ in most gambling jurisdictions.”
ABV also highlighted that prediction markets do not impose limits on winning players, a point that Kyrollos discussed at an annual fall meeting with the Wyoming Gaming Commission last year. Additionally, offshore sportsbooks stand to gain from this shift as players look to escape the implications of the potential phantom income taxation.
Source: SBCAmericas
