There’s a storm brewing in the gambling sector, and most investors are still stuck watching charts without reading the fine print. Buried inside the newly passed Big Beautiful Bill is a detail that could wreck the bottom lines of both retail gamblers and the casinos that feed off them.
Starting in 2026, only 90% of gambling losses will be tax deductible. That means even if a gambler breaks even over the year, they may still owe the IRS. This is not a glitch. This is a revenue clawback targeting consistent volume players, a cohort the house relies on to fill tables and keep the slots flashing.
That change cuts to the heart of the gaming economy. Casinos report record revenue because high-volume players burn through cash, offset it on taxes, and keep coming back. If that tax offset gets pulled, player behavior may shift hard. Especially among the sharp bettors, where tax optimization is part of the game.
On the corporate side, names like DraftKings and Caesars could feel pressure. These companies rely heavily on customer retention and volume. And if volume slows, the growth narrative does too. DraftKings closed last week near $41, down from its April high of $52. Short interest is creeping up, and daily mentions on Reddit are falling. This is a macro regulatory risk story.
Despite that, the market hasn’t fully priced in the 2026 shift. There’s a window here. If these names see a Q3 bounce on NFL hype, it might set up a top into year end. Especially if Treasury yields stay elevated and consumer sentiment softens, which could hit discretionary entertainment like gambling.
For now, the stocks may hold up into football season. But once the IRS comes knocking next year, the player pool could shrink and margins might compress. This change won’t kill gambling stocks overnight. But it introduces a tax headwind in a sector that already faces regulatory threats, thinning consumer wallets, and rising acquisition costs.
Disclaimer: This is not financial advice