Paying taxes on Bitcoin gambling winnings

A bet is a bet whether you stake dollars or Bitcoin. If you win, the IRS treats the winnings as taxable income. Paying with cryptocurrency adds a wrinkle the casino cashier never had to think about: the coins you wagered are property, so moving them can create a gain or loss of its own.

Crypto sportsbooks and casinos have made this a common situation. Many of them run offshore and never send a tax form, which leaves the reporting entirely to you.

Two taxable events, not one

When you gamble with cryptocurrency, a single wager can touch your taxes twice.

First, spending or converting crypto to place a bet is a disposal of property. If the coins are worth more than you paid for them at the moment you stake them, that difference is a capital gain, reportable whether or not the bet wins. If they are worth less, you have a capital loss you can use.

Second, anything you win is ordinary income, measured in US dollars at the coin's fair market value on the day you receive it. That same dollar figure becomes your cost basis in the won crypto, so a later sale is measured against it rather than against zero.

How the winnings are taxed

Gambling winnings are ordinary income. You report them on Schedule 1 of Form 1040, on the gambling line, and they are taxed at your regular rate. This applies to card games, sports bets, slots, lotteries, and online casino play, paid in cash or in crypto.

A US payer running a regulated book issues Form W-2G once winnings pass set thresholds, and it may withhold 24% for federal tax before you see the money. Backup withholding, also 24%, can apply if you did not give a correct taxpayer ID. Most crypto gambling sites operate offshore and do neither. The absence of a W-2G does not remove the tax: the duty to report every win is yours regardless of what paperwork shows up.

Form 1040 also asks, near the top, whether you received or disposed of digital assets during the year. Wagering or winning crypto makes that a yes.

Deducting losses, and the 2026 limit

You can deduct gambling losses, but only if you itemize on Schedule A, and only up to the amount you won. A losing year does not create a write-off against your salary.

One rule changed. Starting with the 2026 tax year, a 2025 law caps the deduction at 90% of your losses, still limited to your total winnings. Someone who wins $50,000 and loses $50,000 can now deduct $45,000, leaving $5,000 taxed even though they broke even at the table. Plan for that gap before it surprises you in April.

If gambling is your trade or business, you file on Schedule C, deduct related expenses, and owe self-employment tax on the net. The 90% cap on wagering losses reaches professional filers too.

Records to keep

Good records turn a frightening notice into a short reply. For each session, note the date, the platform, the type of game, and the amounts you won and lost. For crypto, add two figures the IRS cannot read from a blockchain alone: the US dollar value of each wager and payout when it happened, and your cost basis in the coins you staked.

Keep any Form W-2G you receive, and Form 5754 if you split winnings with other people. Exchange and wallet exports fill in the rest. A log kept as you play carries far more weight with an examiner than numbers rebuilt from memory months later.

At tax time

1. Pull your play history. Get the wagering records and wallet exports for every site you used, offshore ones included.
2. Total your winnings in dollars. Value each win at its fair market value on the win date, and report the full amount.
3. Handle the crypto separately. Report the capital gain or loss from staking the coins as its own line, apart from the winnings.
4. Apply losses if you itemize. Deduct up to your winnings, and remember the 90% cap that starts in 2026.
5. Get help when the year is messy. Several sites, DeFi bets, or missing basis is exactly when a crypto-tax specialist earns the fee.

Winnings paid in crypto are taxed like any other gambling income, with an added layer for the property you bet. Report the wins and track your basis in the coins you staked, and the rest is arithmetic.