A little-noticed provision tucked deep within the “One Big, Beautiful Bill” that was passed and signed into law last week is raising alarm bells among professional gamblers. Wall Street and gambling companies themselves, however, don’t seem that bothered.
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What Happened: On Wednesday, CNBC’s Jim Cramer highlighted an under-the-radar tax provision in President Donald Trump’s bill that pertains to the taxing of gambling winnings.
Currently, gamblers can deduct losses from winnings when filing taxes, paying only on net gains, Cramer says, similar to stock trading. But starting next year, taxpayers will only be able to deduct 90% of their gambling losses, which could have outsized consequences for professional gamblers, who often operate on large volumes of wins and losses.
Cramer cited an example where a poker pro with $5.2 million in winnings and $5 million in losses would now be taxed as though they earned $700,000, and would thus end up owing more in taxes than what they won.
Yet, Cramer notes that top gambling stocks remain unfazed by this new tax quirk, highlighting DraftKings Inc.’s (NASDAQ:DKNG) 20% rally in June, and Flutter Entertainment PLC (NYSE:FLUT) up by 12.7% during the same period.
This was attributed to the fact that sports betting companies only cater to players who are net losers in the long run, and would thus not be impacted by this incremental taxation.
“This law just makes the moat even bigger,” Cramer said, reaffirming his bullish outlook on both companies despite the tax-related concerns.
Neither DraftKings nor Flutter Entertainment immediately responded to Benzinga’s requests for a comment on the matter. This story will be updated as soon as we hear back from them.
Why It Matters: Professional bettors are, of course, very concerned regarding this rule, with Zachary Zimbile, a Las Vegas CPA, saying, “Add a 10% penalty and it eats a lot of their profit.”
Rep. Dina Titus (D-NV.), co-chair of the Congressional Gaming Caucus, has, however, vowed to fix the issue, saying that the bill only serves to punish gamblers who do the right thing by reporting their gambling winnings while filing their annual taxes.
Professional poker player Phil Galford explained the implications of this new rule on professional gambling in a video on X, saying that “you can’t be a professional gambler in the U.S. if this goes through.”
Price Action: Shares of DraftKings were up 1.09% on Wednesday, trading at $42.80, and are down 0.51% after hours.
DraftKings’ shares score well on Momentum in Benzinga’s Edge Stock Rankings, with a favorable price trend in the short, medium and long term, but how does it compare with Flutter, and its other peers and competitors within this industry? Click here to find out.
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