The American Bettor’s Voice (ABV) is sounding the alarm over the One Big Beautiful Bill Act (OBBBA), which could severely impact professional gamblers and the broader gaming industry in the United States. ABV board member Adam Robinson has authored a paper that outlines how changes in the legislation related to gambling loss deductions could potentially cost sportsbooks an estimated $18 billion in handle losses.
Robinson’s paper, “The OBBB Gambling Tax Provision: An Existential Threat to Regulated Sports Betting,” provides a detailed analysis of how the act could lead to significant financial losses. The ABV, a non-profit organization advocating for sports bettors, aims to draw attention to these concerns. Led by CEO Richard Schuetz, the organization includes influential industry figures such as professional gamblers Gadoon “Spanky” Kyrollos and Billy Walters.
The Senate version of the OBBBA introduces considerable modifications to the way gambling losses are deducted, potentially subjecting gamblers to taxation on more than just their net winnings. The crux of these changes is that only 90% of a gambler’s total losses in a taxable year can be deducted, leaving what ABV refers to as ‘phantom income.’ This could result in gamblers owing taxes on winnings they never actually received, placing an undue burden on them.
ABV projects that the OBBA could lead to a decline of $1.5 billion in gross gaming revenue. This shift threatens to upheave the American gaming industry, with forecasts predicting substantial financial repercussions. According to ABV, a mere 10% of bettors are responsible for 80% of the betting handle. Robinson emphasized, “The industry faces $18 billion in annual handle loss, $1.5 billion in gross gaming revenue decline, and a $420 million reduction in state tax revenue. In more severe scenarios, handle losses could exceed $48 billion annually.”
States like New York, New Jersey, Pennsylvania, Ohio, and Illinois could see significant revenue drops as bettors potentially move away from regulated platforms. For New York, ABV estimates an annual tax loss of approximately $129 million, based on previous year’s figures and the state’s 51% tax rate. Similarly, Illinois might experience a $41 million annual tax hit, considering its progressive tax structure and the forecasted handle for 2024. This calculation doesn’t include the newly instituted per-wager tax in the state.
Moreover, the OBBA’s provisions could jeopardize the financial stability of major operators. ABV predicts that FanDuel could endure a loss in betting handle ranging from $7.2 billion to $19.2 billion due to customer migration resulting from the deduction changes. DraftKings is facing a similar threat, with potential handle losses estimated between $7.2 billion and $19.2 billion. Additionally, PENN’s strategic partnership with ESPN might be at risk, as ESPN Bet, which holds about a 2.35% market share, could face customer attrition leading ESPN to potentially reconsider its $2.1 billion contract.
As concerns grow about the impact of the OBBBA on gambling loss deductions, ABV anticipates a shift toward alternative betting options, specifically prediction markets. Regulated by the Commodity Futures Trading Commission (CFTC), these markets allow 100% loss deductibility and operate under more favorable tax conditions compared to traditional sportsbooks. Robinson noted that bettors have immediate alternatives: prediction markets regulated by the CFTC, which offer full loss deductibility and a favorable tax framework, as well as offshore sportsbooks.
Prediction markets hold appeal beyond tax benefits; they are not subject to the OBBBA’s phantom income taxation, making them attractive to both professional gamblers and high-volume recreational bettors. One professional bettor shared with ABV that they had wagered over $1 million using prediction markets like Kalshi during a busy college football Saturday earlier this year.
Furthermore, the widespread availability of prediction market platforms nationwide could draw bettors away from regulated sportsbooks. “Prediction markets provide operational advantages that go beyond favorable tax treatment,” Robinson elaborated. “CFTC regulation allows for operation in all 50 states, unlike the state-by-state licensing required for sportsbooks. Age requirements drop to 18+ compared to the standard 21+ in most gambling jurisdictions.”
ABV also underlined that prediction markets do not impose limits on winning players, a point emphasized by Kyrollos at an annual fall meeting with the Wyoming Gaming Commission last year. Additionally, offshore sportsbooks could benefit from this shift as players look to mitigate the effects of potential phantom income taxation.
The debate over the OBBBA highlights a complex intersection of policy and industry dynamics, with significant implications for stakeholders across the gambling landscape. While some view prediction markets as a viable alternative, others caution against the uncertainties and risks associated with such platforms. As the gaming industry grapples with these challenges, the conversation continues on how best to balance regulatory intentions with the economic realities faced by bettors and operators alike.
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