Taxes

As I researched how taxation for online sports gambling worked, my original goal was simply to explain how sports gambling winnings and losses are taxed. The deeper I looked, however, the more I realized that many important questions remain unresolved. In several areas, the IRS has provided little or no meaningful guidance. Combined with the rapid growth of online sportsbooks, DFS operators, sweepstakes platforms, and prediction markets, this has created a lot of confusion. In practice, the lack of guidance is less important than it might seem, because sports bettors usually do not receive tax forms tied to their betting activity, so many people never report any income in the first place. This is a policy choice of the IRS, not an administrative oversight. Below are the specific reasons why new-user promo hunters are unlikely to receive any tax forms despite signing up for many different sports betting platforms:

• The current 2026 threshold for issuing a 1099-MISC is $2,000. That figure will continue to rise with inflation each year.
• Online sports gambling operates within regulated financial systems that require full KYC (Know Your Customer) identity verification. As a result, there is a clear digital paper trail linking you to the platform and your transactions. However, unless a reportable tax form (such as a W-2G or 1099-MISC) is generated and sent to the IRS, the federal/state government will not be aware that you engaged in any gambling activity. Similarly, standard ACH deposits and withdrawals are processed like ordinary bank transfers and do not trigger IRS notifications.
• Traditional sportsbooks, such as DraftKings, BetMGM, and Fanatics, do not report net winnings. Instead, they issue a Form W-2G only for individual wagers that win at least $2,000 and pay at least 300 times the wager amount. A wager large enough to trigger that form requires an extremely unlikely parlay, which a promo hunter would never make, to hit.
• If you are taking advantage of a new-user promotion on a DFS pick’em platform, such as PrizePicks, Underdog, or Chalkboard, a 1099-MISC will be issued if your net earnings in a calendar year are at least $2,000. Simply arbitraging wagers that exploit new-user promotions and occasional free picks will not come anywhere close to this threshold.
• Platform-funded sweepstakes sportsbooks, such as Fliff, Onyx, or Thrillzz, where you exchange virtual coins for real money, are generally expected to issue a 1099-MISC if you redeem at least $2000 in a calendar year. That said, some of these platforms may not always handle reporting as carefully as they should, leaving the onus on the bettor to self-report. Platform-funded sweepstakes sportsbooks are able to operate by using the legal loophole of being a sweepstakes operator. Purchases on these platforms involve a bundle of worthless coins and a bonus of site-credit virtual cash. This virtual cash, after 1x playthrough, is redeemable for a prize at a 1:1 US dollar rate. It is conceivable that when a sweepstakes sportsbook issues a 1099-MISC, it could report gross redemption, since the money spent by the customer is unrelated to the prize being awarded. Users would understandably dislike that interpretation, which is why operators may instead report based on a user's actual net profit. With the IRS silent on the entire concept of sweepstakes operators, the future is nebulous. For caution's sake, you may want to avoid crossing the $2000 redemption threshold on these platforms, which will not be an issue if you are only maximizing value from new-user promotions.
• Peer-to-peer sweepstakes sportsbooks operate in the same manner as platform-funded sweepstakes sportsbooks, except for the fact that instead of making bets against the platform, these sportsbooks act like financial exchanges where different users are betting against each other. For this reason, the markets are incredibly tight with NoVig leading the way far beyond any other platform because they charge zero commissions. In terms of how and at what threshold they report 1099-MISCs, interpretation is once again key since there is no official IRS guidance. However, this interpretation is actually impactful to a promo hunter trying to avoid tax forms. Extracting value purely from their new-user promotions will not get you past the $2,000 gross redemption threshold, but these platforms are so tight that they can be excellent places to hedge. On NoVig, support documents say they will issue a 1099-MISC only if yearly redemptions exceed $2000 and you netted a profit (redemptions - purchases). As such, I would keep track of my yearly redemptions and purchases on NoVig, only placing a hedge bet here if I knew I would stay below both thresholds should the hedge win.
• CFTC-regulated prediction markets are relatively new to the U.S. and, as of now, these platforms will not generate any tax documents on your trading activity, leaving it 100% in your hands to report. Kalshi and Polymarket are two of the biggest examples of open-market prediction exchanges, where users place bids and offers directly against one another and prices are determined by supply and demand. NoVig operates the same way but with virtual currency. Meanwhile, platforms like DraftKings Predictions and OG Predictions are also CFTC-regulated prediction markets, but they look more like house-run products because users are only allowed to act as takers. Behind the scenes, liquidity is provided by a market maker posting quotes, so the contracts are still exchange-traded even though users cannot submit their own bids and offers.