Poker Players Challenge OBBBA Phantom Income Tax

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Fri Jul 24, 2026, 9:00 am ET

Read Time: 5 minutes

Poker Players Challenge OBBBA Phantom Income Tax

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Professional poker players and gambling tax experts have urged the IRS to reconsider the OBBBA's controversial gambling loss deduction rule.

The speakers testified during a July 17 IRS hearing about the provision's potential consequences. The rule limits gambling loss deductions to 90% of gambling losses. As a result, gamblers can face taxes on income they never actually received.

The controversy has intensified across the gambling industry. The rule affects professional poker players, recreational gamblers, sports bettors, and casino customers. Critics warn that it could also undermine regulated markets.

OBBBA Rule Creates Mismatch Between Gambling Activity and Actual Profit

The One Big Beautiful Bill Act (OBBBA) changed the treatment of gambling losses for tax years beginning after December 31, 2025. Under the new rule, taxpayers can deduct only 90% of their gambling losses. The deduction also remains limited to the amount of gambling winnings.

That change creates a mismatch between taxable gambling activity and actual financial profit. For example, a player could win $100,000 and lose $100,000. The player would break even financially, but the rule could still create $10,000 in taxable income.

Professional poker players face particularly serious risks because tournament poker involves significant variance and high volumes. A player may record millions of dollars in cashes while spending nearly the same amount on buy-ins.

Katie Stone, a former poker professional, provided a stark example during her testimony. A player could gross $2 million in tournament cashes and spend $1.9 million on buy-ins. That player would net $100,000 but face taxation on $300,000 under the new rule.

Professional players oppose the phantom tax because it can impose tax liability on money they never retained. The rule could also make high-volume play less viable. Therefore, some players may reconsider regulated poker markets, including US online poker sites.

Gambling Industry Voices Broaden Opposition to Phantom Tax

The IRS hearing showed that opposition extends well beyond professional poker. Ten of the 12 scheduled speakers appeared, and all opposed the gambling tax change. The participants included lawmakers, tax professionals, gaming industry representatives, poker players, and recreational gamblers.

Legislative & Economic Perspective

Rep. Dina Titus (D-NV) argued that taxing income people never received violates basic tax policy principles. She said taxpayers should face taxes on actual net income, not artificial gains created by a deduction limit.

Titus also warned that the rule could harm regulated state markets. She said it could drive players toward offshore and unregulated gambling options. That concern could affect the broader USA gambling market as legal operators compete with unregulated alternatives.

Mike Vanaki of the American Gaming Association highlighted the industry's broader economic importance. He said domestic gaming supports more than 1.8 million jobs. The sector also generates $104 billion in wages and salaries.

Additionally, gaming produces $53 billion in state and local tax revenue. Vanaki's figures underscored the potential economic consequences of policies that reduce participation in regulated gambling.

Poker Players & Content Creators

Stone emphasized the massive variance involved in high-volume tournament poker. Players can generate enormous gross cashes while spending nearly as much on entry fees.

She argued that the new rule could create tax bills far beyond a player's actual profit. In extreme cases, the resulting liability could cause financial ruin or bankruptcy.

Sara O'Connor stressed that the rule does not only affect high-stakes professionals. Low- and mid-stakes recreational players can also play frequently, experience wins and losses, and finish the year around break-even.

O'Connor argued that the provision penalizes volume and honesty. Players who maintain clear records could still face tax liabilities despite having little or no net profit.

Joshua Thatcher, known online as "PLO Professor," warned that the rule could incentivize off-the-books gambling. He said the provision could encourage illegal betting markets and other forms of unreported gambling.

Tax & Industry Experts

Todd Witteles of Poker Fraud Alert urged the IRS to delay implementation. He argued that Congress needs more time to consider repeal legislation.

Witteles also proposed several practical changes if the rule remains active. First, he recommended separating gambling activity by genre. Poker, sports betting, casino games, and other gambling could each receive separate reporting categories.

That approach would allow players to net gains and losses within each category. It could also simplify compliance for high-volume players.

Witteles further urged the IRS to modernize proof requirements. Online statements, cryptocurrency transaction logs, and bank transfers should qualify as audit documentation.

He also called for clearer guidance on expense deductions. Tournament buy-ins, rake, and legitimate business expenses should not face the same 90% limitation as gambling losses.

Ray and Gary Kondler of Kondler & Associates addressed the enormous administrative burden facing taxpayers and tax preparers. The firm has warned that the provision could create additional paperwork, confusion, and compliance costs.

The firm also questioned whether proposed implementation methods provide enough predictability. It argued that the IRS could face substantial administrative work while taxpayers struggle to understand their obligations.

Lawmakers Continue Efforts to Repeal Gambling Tax Rule

Despite the IRS hearing, the agency cannot repeal the provision. Congress must change the law.

Several legislative efforts have attempted to restore the previous 100% deduction for gambling losses. Rep. Titus previously introduced the FAIR BET Act, while Reps. Max Miller and Steven Horsford later introduced the bipartisan FULL HOUSE Act.

The FULL HOUSE Act would restore the previous wagering-loss rules and eliminate the 90% deduction limit. The bill emerged after earlier repeal efforts stalled in Congress.

The debate now extends beyond poker. Lawmakers and industry representatives argue that the provision could damage regulated gambling markets and create unnecessary administrative complexity.

Meanwhile, players and tax experts continue pressing for a legislative fix. Until Congress acts, the phantom income rule remains active for 2026 tax years.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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