Congress Moves to End Poker's Phantom

A Key Committee Vote in Congress

A House committee in Congress passed a bill to eliminate the 90% cap on gambling loss deductions by a vote of 38 to 5. If the legislation completes the approval process, players would again be able to deduct 100% of provable losses, retroactively to January 1, 2026.

The provision was folded into a broader tax package, the Digital Asset Tax Certainty Act (H.R. 10357). House Ways and Means Committee Chairman Jason Smith and Nevada Representative Steven Horsford framed the change as a matter of tax fairness: the state should not tax money that people have not actually earned.

How the Phantom Tax Arose

The issue traces back to July 2025, when a comprehensive tax package known as the One Big Beautiful Bill Act (OBBBA) was signed. An adjustment inserted at the last moment reduced the deduction for provable gambling losses from 100% to 90% of winnings, effective January 1, 2026.

For decades before that, a simple rule applied: players could deduct losses up to the amount of their total winnings. The new cap introduced what the poker world calls the phantom tax, meaning taxation of income a player never actually earned.

A typical example illustrates the problem. Suppose a tournament player wins $100,000 in a year but also spends $100,000 on buy-ins, ending at net zero. Under the 2026 rules, that player could deduct only 90% of losses, or $90,000. The remaining $10,000 became taxable income even though the player made no profit.

The change drew a loud response from the poker community. Poker Hall of Fame member Erik Seidel announced a cutback on his playing schedule and a partial retirement in response to the tax changes. Nevada Congresswoman Dina Titus repeatedly warned that the burden would push players toward unregulated and illegal foreign platforms.

A Bipartisan Breakthrough

Efforts to repeal the 90% cap lasted over 14 months and produced three separate bills: the FAIR BET Act (Representative Dina Titus), the WAGER Act (Representative Andy Barr), and the FULL HOUSE Act (Representatives Max Miller and Steven Horsford).

A key shift came in mid-September 2026, when provisions fully restoring loss deductions were incorporated into the Digital Asset Tax Certainty Act. The provision was approved in committee with a rare bipartisan majority.

What Happens Next

Committee approval is a significant step, but the legislative process is not complete. Bill H.R. 10357 now heads to the House Rules Committee and then to the floor of the House of Representatives, with a vote expected after the November midterm elections. It must then pass the Senate and receive the president's signature.

Prediction markets currently estimate the likelihood of fully restoring the 100% deduction of losses by April 1, 2027, at approximately 50%.

What Players Should Do Now

Tax experts offer straightforward guidance for poker players while the legislation advances:

• Keep meticulous records of all wins and expenses, including receipts, buy-in slips, and tournament statements for the entire year 2026.
• Prepare for the possibility of an amended tax return. If the law passes retroactively to January 1, 2026, players with accurate records could file an amended return and potentially receive refunds.
• Treat documentation as the decisive factor. Without precise records, a retroactive benefit may be difficult or impossible to claim.

The core principle at stake is simple: players should not owe tax on money they never earned. Whether that principle becomes law depends on the remaining steps in Congress.