The debate over how gambling winnings are taxed has ignited a battle in Congress, centered around a seemingly simple principle: nobody should pay taxes on money they haven’t actually made.
Currently, a law enacted in 2025 limits the amount of gambling losses that can be deducted from winnings. This means even if a gambler wins and loses the same amount, they can still be taxed on a portion of their winnings – effectively taxed on losses.
Representative Dina Titus, whose district heavily relies on the gaming industry, is leading the charge to reverse this change with the FAIR BET Act. She argues the current system is fundamentally unfair and distorts the true picture of a gambler’s income.
The issue stems from a sweeping budget package, dubbed the “Big Beautiful Bill,” signed into law in July 2025. While extending certain tax cuts and altering social programs, it also capped the deduction for gambling losses at 90%, a significant shift from the previous policy.
Critics warn this change isn’t just about individual gamblers. It risks pushing activity towards unregulated, offshore betting sites, where taxes aren’t collected and consumer protections are absent. This creates a dangerous environment and undermines responsible gaming initiatives.
Titus has persistently sought support for her FAIR BET Act, appealing to the House Ways and Means Committee and even attempting to attach it to the National Defense Authorization Act. These efforts faced resistance, but she remains determined to restore the previous, more equitable system.
A recent development offers a glimmer of hope: Representative Tom Cole has signed on as a co-sponsor. This bipartisan support signals growing recognition of the problems caused by the current deduction cap, even within a divided Congress.
The FAIR BET Act aims to reinstate the long-standing rule allowing gamblers to deduct all losses from winnings, ensuring taxes are only paid on actual net income. For Titus, it’s about correcting a flawed policy and upholding a basic principle of fairness in the tax code.
The bill faces an uphill battle in the Ways and Means Committee, but the increasing support suggests a growing awareness that taxing “phantom income” is not only unjust but also detrimental to the gaming industry and the safety of players.
