President Donald Trump announced on December 9 that he is contemplating the elimination of federal taxes on gambling winnings. This potential move aligns with his administration's broader efforts to reduce taxes on various forms of income, including tips and overtime pay.
Speaking to reporters aboard Air Force One, Trump indicated his openness to the proposal when questioned about exempting gambling earnings from federal tax. He stated, "We have no tax on tips, we have no tax on Social Security, and we have no tax on overtime." Regarding gambling winnings, he added, "No tax on gambling winnings, I don't know. I'm gonna have to think about that."
This consideration follows the enactment of the One Big Beautiful Bill Act over the summer, which introduced exemptions for tips and overtime.
The potential impact of such a policy change is significant, as gambling is a widespread activity in the U.S. According to the American Gaming Association, nearly 60% of American adults have gambled in the past year, with 30% visiting physical casinos and 21% engaging in sports betting.
How the IRS Taxes Gambling Winnings
Currently, gambling winnings are classified as taxable income. Individuals receiving winnings exceeding $600 are issued a W-2G form.
The Internal Revenue Service imposes a 24% withholding rate on gambling payouts of $5,000 or more. This rate applies to various forms of regulated wagering, including lotteries, raffles, casinos, and horse racing.
Depending on the type of winnings and the documentation provided, the federal withholding rate can increase. Up to 28% of prize money may be withheld for winnings over $5,000. If a bettor does not provide their Social Security number to the gambling establishment, this amount can rise to 31%.
All gambling winnings must be reported on an individual's annual Form 1040 tax return.
While Trump did not confirm if a formal proposal is under review, his comments suggest a potential willingness by the administration to extend tax relief to additional sectors.
Could Trump's Tax Relief Proposal Extend to Crypto?
The cryptocurrency community has begun speculating whether Trump's potential tax relief on gambling wins could be extended to crypto-related activities.
One user on X questioned if meme coins should be considered gambling:
do memecoins count as gambling? asking for a friend.
— poet.base.eth (@1CrypticPoet) December 11, 2025
Meme coins, known for their volatility and reliance on viral social media trends, have often been compared to gambling due to their speculative nature.
The IRS currently classifies cryptocurrency as property, meaning capital gains tax is applicable upon selling, trading, or spending crypto. Short-term crypto gains (held for less than a year) are taxed between 10% and 37%, while long-term gains (held for over a year) are taxed between 0% and 20%.
As of now, there is no indication that any tax relief on gambling wins, if implemented, would extend to crypto winnings.
Other users have also inquired about the potential application of such relief to prediction markets.
Does it include prediction markets? pic.twitter.com/5VsUq4aFfb
— WiiMee (@wiimee) December 11, 2025
One user humorously suggested that prediction markets might rebrand themselves as "educational gambling" sites in light of Trump's comments.
JUST IN: Prediction markets backtrack - label themselves 'educational gambling' sites
— tj (@Nstr_tj) December 11, 2025
Polymarket, a prominent prediction market platform, allows users to bet on future events, including cryptocurrency prices, policy decisions, and entertainment outcomes, often using crypto for transactions.
Following a period of regulatory scrutiny, Polymarket received approval from the Commodity Futures Trading Commission (CFTC) in September to re-enter the U.S. market. This approval came after its acquisition of QCEX, a CFTC-licensed derivatives exchange, in July.
This development suggests that Polymarket is likely to frame its event contracts as financial derivatives rather than gambling. Prediction markets have historically sought to distinguish themselves from the gambling industry.
Therefore, it is unlikely that Trump's proposed tax relief on gambling winnings would extend to crypto-based prediction markets.