Trump mulls ending taxes on gambling winnings
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President Donald Trump said on Dec. 9 that he is considering the idea of eliminating federal taxes on gambling winnings, signaling another potential addition to his administration’s widening effort to reduce taxes tied to everyday income streams such as tips and overtime.
Speaking to reporters aboard Air Force One, Trump said he may entertain the proposal when asked whether gambling earnings could eventually become exempt from federal tax.
“We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime,” he said.
“No tax on gambling winnings, I don't know. I'm gonna have to think about that.”
The development comes after Trump signed the One Big Beautiful Bill Act over the summer, which instituted new exemptions including “no tax on tips” and “no tax on overtime.”
Any move involving gambling taxation would touch a significant portion of the U.S. population. Data from the American Gaming Association shows nearly 60% of American adults have gambled in the past year, with 30% visiting a physical casino and 21% placing sports bets.
How IRS taxes gambling winnings
Under the current system, gambling winnings are treated as taxable income. A W-2G form is issued to individuals who win more than $600.
The Internal Revenue Service’s withholding rate for gambling payouts of $5,000 or more is 24%. The IRS applies the rule across several categories, including lotteries, raffles, casinos, horse racing and other forms of regulated wagering.
Depending on the type of winnings and documentation provided, federal withholding can increase. Up to 28% of the prize money may be withheld on winnings above $5,000, while the amount can reach 31% if the bettor does not give their Social Security number to a gambling establishment.
All gambling winnings must be reported on an annual Form 1040 submission.
Trump did not specify whether a formal proposal is under internal review. However, the comment signals the administration may be open to expanding tax relief to new sectors.
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Could Trump's tax relief proposal extend to crypto?
The crypto community was quick to jump in and speculate if Trump's tax relief proposal, once implemented, would extend to crypto.
A Base developer asked on X if meme coins counted as gambling.
do memecoins count as gambling? asking for a friend.
— poet.base.eth (@1CrypticPoet) December 11, 2025
While cryptocurrencies are volatile anyway, meme coins, in particular, take it to the extreme end because they are driven by viral social media trends. Many have drawn comparisons between trading meme coins and gambling.
The IRS treats cryptocurrency as property. This means capital gains tax applies when you sell, trade, or spend crypto. Short-term crypto gains (within a year) are taxed in the range of 10%-37%. Long-term crypto gains (over a year) are taxed in the range of 0%-20%.
So far, there is no indication that Trump's tax relief on gambling wins, if it is implemented, will extend to crypto wins.
Another user wondered if the tax relief would extend to prediction markets.
Does it include prediction markets? pic.twitter.com/5VsUq4aFfb
— WiiMee (@wiimee) December 11, 2025
Another joked that prediction markets could label themselves as "educational gambling" sites following Trump's comment.
JUST IN: Prediction markets backtrack - label themselves 'educational gambling' sites
— tj (@Nstr_tj) December 11, 2025
The world's largest prediction market, Polymarket, allows users to pay with crypto to predict events such as future Bitcoin (BTC) prices, Fed policy, box office results, etc.
After being subjected to intense regulatory scrutiny, Polymarket won approval from the Commodity Futures Trading Commission (CFTC) in September to return to the U.S. market after three years. The regulator's approval follows Polymarket's $112 million acquisition of QCEX, a CFTC-licensed derivatives exchange, in July.
It means Polymarket is expected to frame its event contracts as financial derivatives, not gambling. In fact, prediction markets have tried hard to distance themselves from the gambling label.
So, Trump's tax relief proposal on gambling winnings, if implemented, isn't expected to extend to crypto-based prediction markets.
