FAIR Treatment of Lost Bets

By: Avner Kronisch

Introduction

On July 7, 2025, Representatives Dina Titus (D-NV) and Ro Khanna (D-CA) introduced H.R. 4304, the Fair Accounting for Income Realized from Betting Earnings Taxation Act, commonly known as the FAIR Bet Act.[1] Two days later, Senators Catherine Cortez Masto (D-NV),  Jacky Rosen (D-NV), and Ted Cruz (R-TX) introduced the Senate companion bill, S. 2230, titled Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE Act).[2] The House version has been referred to the Committee on Ways and Means, while the Senate version was referred to the Committee on Finance.

Reversing the OBBB Provision

The FAIR Bet Act attempts to reverse a provision included in H.R. 1, part of President Trump’s signature tax legislation, also known as the One Big Beautiful Bill Act (OBBB). [3] Under the bill, beginning on January 1, 2026, taxpayers can deduct only ninety percent of their gambling losses against their gambling winnings on federal income taxes.

This is a considerable shift from the current tax code, which allows for a full deduction of gambling losses if they do not exceed total winnings. Under the current law, a gambler who wins one million and loses one million in the same year can deduct the loss, resulting in no taxable income from gambling. Under the new law, only nine hundred thousand of the one million in losses would be deductible, leaving one hundred thousand in taxable income, even though the gambler didn’t make any money. One is usually considered a successful gambler if they win fifty-five percent of their bets, and most gamblers over the long term don’t make money, so this loss deduction makes it even harder to make money.

The Joint Committee on Taxation (JCT) estimates this provision will generate over $1.1 billion in federal tax revenue over the eight years it will be in effect. [4]

Bipartisan Support, Political Confusion, and Setbacks

The FAIR Bet Act has garnered bipartisan support in both chambers of Congress and, to date, has faced little public opposition. When asked about the gambling loss deduction provision included in Trump’s OBBB tax bill, the FAIR Bet Act seeks to reverse, Republican senators expressed confusion and concern. “If you’re asking me how it got in there, no, I don’t know,” said Sen. Chuck Grassley (R-Iowa). Sen. John Cornyn (R-Texas) echoed the sentiment, adding, “I don’t know anything about it. I’m not sure what it does.” Sen. Thom Tillis (R-N.C.) called the provision “bad policy” and admitted he hadn’t tracked it, saying, “I was so focused on Medicaid, I wasn’t looking for other reasons to be against the bill. But that would be another one.” [5]

In the Senate, however, the bill recently faced a procedural setback when Senator Todd Young (R-IN) objected to unanimous consent for its passage. Young sought to tie the elimination of the gambling tax provision to the removal of certain religious tax breaks that had previously been stripped from the OBBB. “I strongly support the underlying bill but will have to object unless you can agree to my request,” Young said on the Senate floor. [6]

Young’s condition for support is the largest obstacle the bill has faced thus far, but it faces additional challenges. The bill is subject to the filibuster and therefore needs sixty votes in the Senate, and Republicans can continue to use it as leverage in broader legislative negotiations. Additionally, Congress is now in recess through August.

Nevada, the state most directly affected due to its robust gambling industry, is represented by two Democratic senators, neither of whom is up for re-election in 2026.

Will the Deduction Limit Survive?

I am skeptical that the deduction change included in the OBBB will be implemented long-term. The provision lacks strong support and key stakeholders, such as casinos and gamblers, oppose it. Even if it temporarily takes effect, it seems likely to be repealed. The tax is only estimated to offset a modest $1.1 billion from a bill projected to add trillions to the national debt; it hardly functions as an offset.  Nevada’s economy, however, relies on the gambling industry and is a critical swing state. With two of its four congressional districts  considered competitive, both parties will eye Nevada as they attempt to win the narrowly divided House of Representatives. The currently quiet issue of taxing gambling losses could resurface with a vengeance when the mid-term election cycle heats up.

1. H.R.4304 – Fair Accounting for Income Realized from Betting Earnings Taxation Act, 119th Congress (2025–2026), Congress.gov, https://www.congress.gov/bill/119th-congress/house-bill/4304
2. S.2230 – Facilitating Useful Loss Limitations to Help Our Unique Service Economy Act (FULL HOUSE Act), 119th Congress (2025–2026), Congress.gov, https://www.congress.gov/bill/119th-congress/senate-bill/2230
3. H.R.1 – One Big Beautiful Bill Act, 119th Congress (2025–2026), Congress.gov, https://www.congress.gov/bill/119th-congress/house-bill/1
4. Joint Committee on Taxation, “Estimated Revenue Effects of H.R. 4304,” JCX-34-25 (July 2025), https://www.jct.gov/publications/2025/jcx-34-25
5. Arthur Delaney, “GOP Senators Had No Idea They Voted For Controversial Gambling Tax,” HuffPost, July 9, 2025, https://www.huffpost.com/entry/gambling-tax-republicans_n_64a6a9d8e4b03d3b9fcb30e7
6. “JUST IN: Todd Young Spars With Dems After Blocking Bill To Allow Tax Deductions For Gambling Losses,” FULL HOUSE Newswire, July 2025.