Shortly after the Senate passed its version of President Trump’s Big, Beautiful Bill, the gambling industry took note of a crucial tax provision. Gamblers would only be allowed to write off up to 90% of their winnings as losses. That means a gambler could lose money for the year but still owe, despite a net loss.
Professional poker player Phil Galfond gave the example of a poker player who breaks even by winning $100,000 at some tables and losing $100,000 at others. Because that player could only write off $90,000 in losses, they would still be taxed as if they had won $10,000.
The math becomes more untenable as the play volume increases.
This new amendment to the One Big Beautiful Bill Act would end professional gambling in the US and hurt casual gamblers, too.
You could pay more in tax than you won.
Contact your representative quickly. pic.twitter.com/U5yToBZDcQ
— Phil Galfond (@PhilGalfond) July 1, 2025
“Completely untenable,” Galfond said of the tax provision.
“You can’t be a professional gambler in the U.S. if this goes through. And that will have a ripple effect on industries that depend on professionals. I know you think a lot of industries don’t depend on professionals but the poker industry does, the DFS industry does.”
No provision in the bill limits losses from financial trading, making event contracts a potential alternative for professional and amateur gamblers alike. Commercial prediction marketplaces like Kalshi don’t offer poker or traditional casino games like slots or blackjack. However, Crypto.com, Kalshi, and partnered brokerages offer event contracts on sports outcomes.
This new tax policy further raises the stakes in Kalshi’s sports event contract lawsuits.
Maryland and the Third Circuit
The District Court in Maryland finished supplemental briefing, and both Kalshi and the state of Maryland filed their reply briefs on June 25. All that’s left is to wait for the judge’s decision regarding whether Kalshi’s contracts are “gaming” and whether federally regulated Designated Contract Markets (DCMs) like Kalshi can continue offering sports contracts. Kalshi also faces its first appeals case in the Third Circuit from its preliminary injunction victory in New Jersey.
In both cases, many groups across the gambling industry filed amicus briefs. The American Gaming Association, Indian Gaming Association, and anti-gambling groups argued that Kalshi’s sports contracts were so similar to sports wagers that they should be considered gaming and thus prohibited. Kalshi countered that as a federally regulated financial exchange, only its regulator, the Commodity Futures Trading Commission (CFTC), has the authority to limit Kalshi’s event contracts.
If Kalshi is able to continue offering sports contracts, it would greenlight a plethora of new competitors to state sportsbooks and approve an alternate form of sports betting in states that haven’t legalized it. Indian tribes that were given the exclusive right to offer sports betting under tribal-state compacts would no longer have exclusivity in their jurisdictions, tribal gaming entities have argued.
The new gambling tax regulations, if passed through Trump’s reconciliation bill, would provide additional financial incentive for sports gamblers to make the switch to prediction markets. Kalshi would likely become the preferred platform for bettors who want to be able to write off all of their losses instead of only some of them.
Hedging, speculation, and gaming
One of the challenges of event contracts is that they fulfill a legitimate need in the financial industry. Instead of trying to guess how an event will affect the S&P 500 or financial instruments like stocks, traders can use Kalshi to hedge against an event outcome directly.
However, the rise of retail investing has also created a growing segment of customers who primarily use platforms like Kalshi as a gambling platform (for speculative bets). U.S. courts and financial regulators have always wrestled with how much speculation to allow in exchange for the benefit of hedging utility. Sports event contracts are the latest battleground over that very question.
