US Gambling Tax Reform Stalls as Legislative Window Closes

The odds of a major tax victory for gamblers in the United States have drastically diminished as of August 2026. The political momentum aimed at reversing the tax hikes imposed by the so-called One Big Beautiful Bill has come to a near-complete standstill. In Washington, it is becoming clear that the remaining time before the end of the year will hardly be sufficient to put the issue on the agenda. Congress faces a long list of tax policy mandates that take precedence over the concerns of the gambling lobby.

This development marks a turning point in a phase where the industry had actually hoped for relief. The chances of tax changes being attached to other legislative vehicles are slim to none. While the industry has experienced an unprecedented boom in recent years, policymakers now seem more intent on securing the revenue generated rather than reducing it through tax breaks for players. This is particularly true in an environment where many states are looking to balance their budgets through levies from iGaming and sports betting.

Numbers and facts

A look at the raw numbers illustrates why the tax issue is so volatile. In the 2021/2022 fiscal year, the brick-and-mortar sector in the state of Pennsylvania alone paid $962 million in taxes on slot machines and table games. The online segment, known as iGaming, contributed another $341 million. In stark contrast, sports betting, despite its massive media presence, brought in only $104 million in taxes. This discrepancy is partly due to the low margins of sports betting operators, which often fall below 10 percent.

In New Jersey, a similar picture emerges. The Division of Gaming Enforcement there reported a tax contribution of $20 million from the iGaming sector for September 2022, which is taxed at 15 percent of Gross Gaming Revenue (GGR). Land-based casinos contributed $16 million, while sports betting was the trailing category with only $5.3 million. This data supports the argument of regulators that online casinos represent a much more stable and productive tax source than betting on sporting events.

Background

The current political situation is also so gridlocked because 2024 was considered a failure for gambling expansion. For the first time since the fall of the PASPA ruling in 2018, there was no expansion of legal gambling in any US state. States like Alabama, which made a comprehensive push for lotteries and casinos in 2024, failed in the Senate. Even in California, the nation's most populous state, there is a standstill following the heavy defeat of a ballot initiative. There, commercial operators and influential tribes are blocking each other.

„The odds of a big tax win for gamblers this year are slimming. Momentum to reverse the One Big Beautiful Bill’s tax hike on gamblers has stalled, as opportunities for it to hitch a ride on a legislative vehicle will be limited.“ - Vault Financial Analysis, Analyst Team at Punchbowl News

Why it matters for German players

For German players, the US debate serves as a reminder of the strict tax framework in their own country. While the US disputes federal tax burdens on players, Germany has had a clear regulation since the State Treaty on Gambling 2021: The racing bet and lottery tax taxes stakes for online slots and online poker at 5.3 percent. This has a direct impact on return-to-player (RTP) rates in German casinos. In contrast to the often tax-free winnings in MGA casinos or the Caribbean, providers with a German GGL license must calculate this levy, which often leads to lower RTP values. Furthermore, strict protection measures such as the monthly deposit limit of 1,000 euros via the LUGAS system and the stake limit of 1 euro per spin on slot machines apply in Germany. The transparency and security of a GGL license take precedence over the tax optimization that players might seek from illegal providers.

What it means for GGL-licensed casinos

Casinos with a license from the Joint Gambling Authority of the States (GGL) must hold their ground in this high-tax environment. They compete with the black market, which pays no taxes and adheres to no limits. The debate in the USA shows that high tax rates can reduce the attractiveness of the legal market. In Germany, the combination of a 5.3 percent stake tax and strict player protection requirements means that GGL casinos must operate particularly efficiently. For players, this means more security and addiction prevention, but also a gaming environment that is economically tightly regulated. A legal provider in Germany cannot afford to ignore the strict rules of the GlüStV 2021, as otherwise they face removal from the whitelist.