The Gambling Deduction Tax Change Could Benefit Prediction Markets and Trump

Truth Social, owned by Donald Trump’s family business, is set to launch a prediction market called Truth Predict. The move comes as tax rules for gambling losses face major changes. From 2026, deductions for losses will drop from 100% to 90% of winnings—leaving some bettors taxed on money they never actually earned.

Meanwhile, prediction markets like Kalshi and Polymarket, where Donald Trump Jr. serves as an advisor, could gain an edge. Unlike traditional gambling, these platforms are classified as financial instruments, sidestepping the new tax limits.

The 90% cap on gambling loss deductions was first proposed in President Trump’s 2020 budget documents. Treasury Secretary Janet Yellen and the U.S. Department of the Treasury pushed for the change, which later appeared in the Senate Finance Committee’s version of the 2021 budget bill. The committee, then led by Sen. Mike Crapo (R-Idaho), included the measure before it became law.

Under the new rule, starting January 1, 2026, gamblers who itemise deductions will only offset 90% of their losses against winnings. For example, someone who wins and loses $100,000 in a year would still pay tax on $10,000 of income—despite breaking even. Nevada’s congressional delegation has since introduced bipartisan legislation to reverse the cap and restore the full 100% deduction. Prediction markets, however, operate differently. Since they are treated as financial products rather than gambling, their users can still deduct 100% of losses. This distinction makes them more appealing to bettors looking to minimise tax burdens. Donald Trump Jr.’s involvement as an advisor to platforms like Kalshi and Polymarket further ties the Trump family to the sector’s growth.

The tax change will hit traditional gamblers hard, forcing them to pay tax on net losses in some cases. But prediction markets, including Truth Social’s upcoming Truth Predict, remain unaffected. With political figures like Trump Jr. already engaged in the industry, the shift could drive more bettors toward these alternative platforms.