Tax Rules Every Gambling Winner Must Know

Expert explains reporting requirements, deductions, and other tax implications of sports betting and gambling winnings.

Published on Feb. 8, 2026

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The rise of legal sports betting across the U.S. has led to a boom in gambling activity, with Americans legally wagering an estimated $1.39 billion on Super Bowl LIX and projections for the 2025 NFL season reaching a record $30 billion through legal U.S. sportsbooks. However, the IRS requires all gambling winnings, including from casual bets with friends, to be reported as 'other income' on tax returns. Tax attorney Asher Rubinstein explains the key rules and considerations around gambling taxes, such as withholding requirements, deducting losses, and reporting cryptocurrency-based winnings.

Why it matters

As legal sports betting continues to expand, it's crucial for winners to understand their tax obligations to avoid penalties and fines from the IRS. The agency is increasingly focused on tracking digital asset transactions, making it harder to hide crypto-based gambling winnings.

The details

According to the IRS, gambling income encompasses more than just casino jackpots - it includes winnings from lotteries, raffles, horse races, and sports betting, both in cash and the fair market value of any prizes won. If your winnings meet certain thresholds, the payer is legally required to issue you an IRS Form W-2G. Even if you don't receive a W-2G, the IRS expects you to report all gambling income as 'other income' on Form 1040. Tax attorney Asher Rubinstein emphasizes that all gambling winnings are considered 'other income' and must be reported, including from casual bets with friends. The same reporting requirements apply to office pools, and receiving winnings via anonymous digital assets like cryptocurrency doesn't exempt you from taxes, as trading platforms are now reporting transactions to the IRS.

  • The Supreme Court's 2018 decision allowed states to legalize sports betting.
  • Americans legally wagered an estimated $1.39 billion on Super Bowl LIX.
  • Projections for the 2025 NFL season reached a record $30 billion through legal U.S. sportsbooks.

The players

Asher Rubinstein

A tax attorney and partner at Gallet Dreyer & Berkey.

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What they’re saying

“All gambling winnings are considered 'other income' and must be reported on Form 1040, Schedule 1.”

— Asher Rubinstein, Tax Attorney (newsy-today.com)

What’s next

Consulting with a tax professional is always advisable if you're unsure about your tax obligations related to sports betting. Accurate reporting and proper planning can help you avoid penalties and fines.

The takeaway

As legal sports betting continues to expand, it's crucial for winners to understand their tax obligations and report all gambling winnings, even from casual bets with friends. The IRS is increasingly focused on tracking digital asset transactions, making it harder to hide crypto-based gambling winnings.