How does the Gambling Tax Affect Online and Crypto Gamblers?

The 90 percent rule applies equally to all legal forms of gambling, including online casino play, online sports betting, and gambling conducted with cryptocurrency. For online gamblers at licensed state-regulated platforms available in New Jersey, Pennsylvania, Michigan, West Virginia, Connecticut, Delaware, and Rhode Island the rule applies identically to in person casino gambling. All winnings are income. All losses are deductible only to 90% of total winnings (subject to the existing cap) if you itemise.

For crypto casino users, the rule applies to the dollar value of winnings at the time they are received. If you win 0.01 Bitcoin at a crypto casino when Bitcoin is worth $90,000, you have $900 in gambling winnings at that moment. This is separate from any capital gains or losses that arise from subsequent changes in the cryptocurrency's value. Crypto gamblers are managing two potential tax issues simultaneously: gambling income under the rules discussed throughout this article, and cryptocurrency capital gains from any appreciation or depreciation in the tokens used or received.

For gamblers using offshore platforms that are not licensed in the United States- including many crypto casinos- the IRS position is clear: winnings are taxable income regardless of where they were earned, regardless of whether a W-2G was issued, and regardless of whether the platform reported anything to the IRS. The obligation to report rests on the taxpayer. The IRS has increasingly used subpoenas, blockchain analysis, and data-sharing agreements with foreign financial regulators to identify offshore gambling income, and enforcement in this area has intensified since 2023.