Crypto Gambling Winnings and Taxation in 2025: What You Should Know

Crypto gambling has become a popular way to mix entertainment with digital finance. As more people use cryptocurrency to place bets and collect winnings, tax rules are catching up. The IRS now treats these digital prizes much like traditional gambling income, which means every win can carry tax responsibilities that should not be ignored.

Understanding how crypto gambling winnings are taxed in 2025 helps avoid mistakes and stay compliant with IRS rules. This article explains how to report digital winnings as income, track their value, handle capital gains, and document every transaction with accuracy. It also explains how losses may offset winnings under certain conditions, giving a clear view of what to expect before tax season.

Report all crypto gambling winnings as ordinary income on IRS Form 1040

The IRS treats all gambling winnings, including those from crypto casinos, as taxable income. Players must report the fair market value of digital coins or tokens received from bets or jackpots as ordinary income on IRS Form 1040. This rule applies to both U.S.-based and offshore platforms.

Participants who win digital assets through JB’s crypto gaming hub, BC, or BiggerZ must calculate the value of their winnings in U.S. dollars at the time they receive them. That amount becomes part of their total income for the year.

If they later sell or exchange those assets, any change in value may create a capital gain or loss. Accurate records of each transaction help confirm the reported amounts.

Reporting all winnings keeps taxpayers compliant and avoids penalties. It also supports transparency as the IRS expands oversight of digital asset activity.

Track the fair market value of crypto winnings at the time of receipt

The IRS treats crypto gambling winnings as income based on their fair market value in U.S. dollars at the time a person receives them. This value sets the amount that must be reported as taxable income for that year.

To find the fair market value, taxpayers should use the price listed on a major exchange at the exact time they gain control of the digital asset. This price represents what the crypto could sell for in an open market.

Accurate records help confirm the value used for reporting and later tax events. For example, if the crypto’s price changes before it is sold or traded, that change results in a separate capital gain or loss.

Good recordkeeping includes noting the date, time, and USD value of each transaction. These details help avoid confusion and support accurate reporting on tax returns.

Any increase in value after winning is subject to capital gains tax

After a person wins cryptocurrency through gambling, the value of that crypto may rise or fall. The IRS treats the amount won as income on the day it is received, based on its fair market value in U.S. dollars. Any later increase in value becomes a separate taxable event.

If the winner sells or trades the crypto at a higher price, the profit counts as a capital gain. The tax owed depends on how long the person held the asset before selling it. Short-term gains apply to assets held for one year or less, while long-term gains apply to those held for more than a year.

Accurate records of the date, value, and sale price help determine the correct tax amount. Without these details, it becomes difficult to calculate capital gains or prove losses. Therefore, proper tracking of crypto transactions remains important for tax reporting.

Keep detailed records of all crypto gambling transactions for accuracy

Accurate records help taxpayers report crypto gambling income correctly. Each deposit, wager, and withdrawal should include the date, amount, token type, and fair market value at that time. These details support proper reporting on tax forms such as Form 8949 and Schedule D.

Good documentation also helps confirm the source of funds and clarify gains or losses. For example, a record of each transaction can show whether a player made a profit or loss after converting crypto back to cash.

In addition, personal notes or screenshots from gambling platforms can verify what occurred if questions arise later. Keeping these details organized reduces confusion and helps meet IRS requirements for crypto reporting.

Accurate records protect taxpayers from mistakes and possible penalties. They also make it easier to calculate cost basis, track winnings, and stay compliant with current tax rules.

Gambling losses can be deducted only if you itemize and report winnings

Tax law treats gambling losses and winnings as separate parts of the same activity. A person must report all gambling winnings as taxable income on their return. Losses can reduce that income only if the taxpayer itemizes deductions on Schedule A of Form 1040.

The deduction cannot exceed the total amount of reported winnings. For instance, if someone reports $5,000 in winnings and $7,000 in losses, only $5,000 of those losses may count. Any extra losses provide no tax benefit and cannot carry forward to another year.

Accurate records matter. The IRS expects receipts, tickets, or account statements that show both wins and losses. Without proper documentation, the deduction may be denied. Therefore, keeping detailed records throughout the year helps a taxpayer support their claim and stay compliant with federal tax rules.

Conclusion

Tax rules in 2025 treat crypto gambling winnings much like traditional gambling income. Players must report all digital winnings as taxable income and track each transaction’s fair market value at the time of receipt.

Any profit from selling or converting crypto later may also create capital gains. Therefore, accurate records help taxpayers calculate gains or losses and complete IRS forms correctly.

Proper documentation, including personal notes and transaction histories, supports compliance and reduces errors. By maintaining organized records and understanding both income and capital gains taxes, individuals can meet current tax obligations with confidence.