Cap on gambling loss deductions repealed before 2027?

As of September 3, 2026, Polymarket prices “Cap on gambling loss deductions repealed before 2027?” at 22% YES with $71K traded. No tracked wallet holds a position on this market, so there is no verdict.

Prediction markets put the probability at 23%: Cap on gambling loss deductions repealed before 2027. Currently, markets see this as unlikely (23% YES). This suggestion stands in stark contrast to the effects of the major legislative Republican tax bill enacted in July.

What’s Happening

The debate over the cap on gambling loss deductions repealed before 2027 centers on a provision embedded in the One Big Beautiful Bill Act, signed into law in July 2025. Effective January 1, 2026, the legislation limits itemized gambling loss deductions to 90% of winnings, down from the previous 100% allowance. This means a taxpayer who wins $1,000 but loses $1,000 in the same year can only deduct $900, leaving $100 of taxable "winnings." The change primarily affects high-income earners in the top tax bracket, who now receive a tax benefit of only 35 cents per dollar deducted under the new cap. Tax professionals have flagged that this creates a scenario where recreational gamblers who break even or lose money overall may still owe federal tax, a departure from long-standing IRS treatment of gambling income and losses [H&R Block, Jul 14].

The political pressure to reverse the cap on gambling loss deductions has intensified in 2026, driven by prominent figures in the sports and entertainment industries. On May 14, 2026, UFC CEO Dana White sent a formal letter to President Donald Trump urging him to reverse the cap on gambling loss deductions, arguing that the provision unfairly penalizes casual bettors and harms the broader gaming economy. White's intervention followed a meeting with Trump at UFC 327 in Miami on April 11, 2026. The letter coincided with a notable shift in market sentiment on Kalshi, where the probability of repeal jumped following the public appeal. However, legislative action remains uncertain, as the provision was a revenue-raising measure within the broader tax package, and reversing it would require either new legislation or executive action that may not have a clear legal pathway [CNBC, May 14].

Looking ahead, the FAIR BET Act has been introduced as a potential legislative remedy, but it has not advanced through committee as of August 2026. Industry analysts note that the cap on gambling loss deductions is already affecting how online casinos and poker players approach their 2026 tax filings, with increased emphasis on meticulous record-keeping for both wins and losses. The practical impact is most acute for high-volume players who frequently have losing years but must still report gross winnings. With the current probability of repeal before 2027 standing at just 23%, the default expectation among market participants is that the 90% cap will remain in force for at least the 2026 tax year. The next meaningful window for change would be a post-election lame-duck session or early 2027 legislative action, though no formal repeal bill has been scheduled for a vote [Kiplinger, Dec 16].

Traded on Polymarket — $71K Volume