Are Crypto Gambling Winnings Taxable? US Rules for Tax Year 2026

Yes. The IRS says gambling winnings are fully taxable and must be reported on your return, and it makes no exception for winnings paid in crypto or won on a site based outside the United States. A crypto payout counts as income at its US dollar value when you receive it, and selling or spending the coins later is a separate taxable event. This article describes what the IRS has published. It is general information and is not tax advice.

At a glance

Are crypto gambling winnings taxable in the US?

IRS Topic 419, which covers casual gamblers, says “gambling winnings are fully taxable and you must report the income on your tax return.” The income includes winnings from lotteries, raffles, sports betting, horse races and casinos, and it includes cash and “the fair market value of prizes.” Nothing in the topic depends on the currency of the payout or on where the casino is based.

The IRS filing rules for US citizens and residents count gross income “from worldwide sources,” so a site’s foreign address does not take the income out of your return. Publication 525 adds that income from illegal activities must be included in income. Offshore crypto casinos hold no US state license, and whether you may play on one depends on the state, which our guide on whether crypto gambling is legal in the US covers.

How is a crypto payout valued?

The IRS treats digital assets as property. Its digital assets page lists Bitcoin and stablecoins as examples, so a payout in a dollar-pegged coin is property too. The same page tells taxpayers to keep records of the fair market value, “as measured in U.S. dollars,” of all digital assets received as income.

The IRS FAQs for digital asset transactions from January 1, 2025 onward give the method for crypto received as pay: the income is “the fair market value of the digital assets, measured in U.S. dollars, when received” (FAQ 58). Those FAQs, numbered 47 to 111, have no entry on gambling payouts. Topic 419 already counts prizes at fair market value, so the two published rules agree: the amount to report is the dollar value of the coins when the withdrawal reaches you.

Do you pay tax again when you sell or spend the crypto?

You can. The IRS FAQs say you recognize a capital gain or loss when you sell digital assets for dollars (FAQ 49), exchange them for another coin or other property (FAQ 64), or use them to pay for services (FAQ 62). Network fees paid in crypto count as well: the digital assets page lists paying a transfer fee with digital assets as a disposal.

The gain or loss is measured from your basis in the coins. For crypto received for services, basis is the fair market value when received, provided you included that value in income (FAQ 59). For coins received after a hard fork, basis equals the amount you included in income (FAQ 107). The IRS has published no FAQ on the basis of crypto won gambling, so confirm how these rules apply to your payouts with a tax professional.

Holding the coins for one year or less makes the result short term, and holding for more than one year makes it long term (FAQ 50). Capital gains and losses go on Form 8949. The gambling income is measured when you receive the payout, so a later price move changes only the capital gain or loss.

What is Form W-2G?

Form W-2G, Certain Gambling Winnings, is filed by the payer. It reports the winnings and any federal income tax withheld to the IRS, and the winner gets a copy. Under the January 2026 instructions, reporting depends on the type of gambling, the amount won and, in general, the ratio of winnings to the wager. Sports bets, for example, are reported only when the winnings are at least 300 times the wager and meet the reporting threshold. The minimum threshold for payments made in 2026 is $2,000, and the IRS will adjust it for inflation each year. Regular withholding is 24% when winnings minus the wager are more than $5,000 from sweepstakes, wagering pools, lotteries and certain other wagers.

The form must carry the winner’s Social Security number or ITIN. The instructions say backup withholding applies if the winner does not give one.

Topic 419 says you must report all gambling winnings, “including winnings that aren’t reported on a Form W-2G.” The digital asset FAQs say the same about crypto income when no payee statement or information return arrives (FAQ 108). If nothing was withheld from a payout, Topic 419 notes you may have to pay estimated tax on that income during the year.

Can you deduct gambling losses in 2026?

Yes, within limits. Under Topic 419 you must itemize on Schedule A, you must have kept a record of winnings and losses, and the deduction cannot be more than the gambling income you reported. Losses give you nothing if you take the standard deduction.

The 2025 tax law (Public Law 119-21, section 70114) added a 90% limit. The IRS describes the amended rule as a deduction limited “to 90 percent of the amount of wagering losses during a taxable year and only to the extent of gains from wagering transactions.” It applies to tax years beginning after December 31, 2025, so it first affects 2026 returns filed in 2027.

These rows are our arithmetic from the rule: take 90% of losses, then cap the result at winnings. In the second row, 90% of losses is $18,000 and the cap brings it down to $10,000. A player who broke even, as in the first row, still has $1,000 of taxable income.

As of November 2026, Topic 419 still describes only the cap at winnings. H.R. 10357, the Digital Asset Tax Certainty Act, includes a section that would restore the old rule for tax years beginning after December 31, 2025. The House Ways and Means Committee ordered the bill reported on September 16, 2026. Congress.gov lists its status as introduced, so the 90% limit remains the law.

State income tax is separate and the rules differ by state. Check with your state’s tax agency.

What is Form 1099-DA and does it cover gambling winnings?

Form 1099-DA, Digital Asset Proceeds from Broker Transactions, comes from custodial brokers such as US exchanges when you sell or exchange crypto through them. Brokers report gross proceeds for transactions on or after January 1, 2025, and basis on certain transactions on or after January 1, 2026. The rules do not cover decentralized or non-custodial brokers.

If you send winnings to a US exchange and sell them there, the IRS can receive the proceeds figure for that sale. The IRS broker FAQs say a broker may not use another custodian’s information to report basis for units transferred in, so keep your own record of what the coins were worth when you received them.

What records should you keep?

Topic 419 requires “an accurate diary or similar record” of winnings and losses, backed by receipts, tickets, statements or other records. Publication 529 says the diary should show at least the date and type of each wager, the name and location of the gambling establishment, and the amounts won or lost. For crypto, the IRS digital assets page adds the type of asset, the date and time, the number of units and the dollar value at the time of each transaction.

For an online crypto casino that means logging every deposit and withdrawal with its date and time, coin, amount, transaction hash and dollar value. Keep winnings and losses in separate columns. A wallet you control gives you your own history of each transfer to check against the casino’s account statement. Our guide on how to prepare for crypto tax season covers the paperwork for sales.

Gambling should stay entertainment. If it stops being that, call the National Problem Gambling Helpline at 1-800-MY-RESET (1-800-697-3738).

Sources

• IRS, “Topic no. 419, Gambling income and losses”
• IRS, “Instructions for Forms W-2G and 5754 (01/2026)”
• IRS, “Internal Revenue Bulletin: 2026-19” (REG-113229-25, wagering losses)
• IRS, “Digital assets”
• IRS, “Frequently asked questions on digital asset transactions”
• Congress.gov, “H.R.10357 – Digital Asset Tax Certainty Act”