Trump-Era Tax Law Caps Gambling Loss Deductions at 90%; AGA Supports Bill Amid Prediction Markets Gains and Casino Lobby Backing

The recent tax provisions introduced under the Trump-era tax law and the OBB Bill have imposed a cap on gambling loss deductions at 90%, affecting professional gamblers who are net-negative for sportsbooks. The American Gaming Association (AGA) has expressed cautious support for the reconciliation bill but acknowledged the unpopular gambling tax changes and indicated intentions to seek amendments. The new tax rules have inadvertently increased the value of prediction markets like Kalshi and Bitnomial, as losses on these markets remain fully deductible and are not classified as gambling losses. Additionally, contracts regulated by the Commodity Futures Trading Commission (CFTC) benefit from a 60% long-term capital gains treatment.

Industry insiders note that the casino lobby supports the new gambling provisions, which primarily penalize sharp bettors, and may not advocate for professional gamblers adversely affected by the changes. There is speculation about the origins of the 90% gambling loss deduction cap, with suggestions ranging from legislative staff errors to influence from major betting companies such as DraftKings and FanDuel. The AGA reportedly advised against publicly criticizing parts of the bill to preserve chances for future amendments.