The Big Idea

The Phantom Tax: A New Bad Beat for Betting

For years, the proliferation of legalized sports betting has been hailed as a new gold rush for professional sports leagues, teams, and, of course, the sportsbooks themselves. It was a burgeoning, seemingly endless stream of revenue built on fan engagement. However, a recent and obscure provision tucked away in the "One Big Beautiful Bill Act" threatens to throw a significant wrench in the works, potentially cooling this red-hot market and creating a ripple effect that could be felt from the World Series of Poker to the NFL's Sunday ticket.

The provision at the heart of the issue, set to take effect on January 1, 2026, fundamentally alters how gambling losses are treated for tax purposes. Currently, gamblers can deduct 100% of their losses against their winnings, meaning if they break even over a year, they owe no taxes on that activity. As detailed in reports from USA Today and ESPN, the new law caps this deduction at 90% of losses. This seemingly small change has seismic implications, creating "phantom income" that will be taxed. For example, a bettor who wins $100,000 and loses $100,000 in a year, netting zero profit, would now only be able to deduct $90,000 of their losses, resulting in a taxable income of $10,000 on money they never actually made.

The Professional's Peril

For the casual weekend bettor, this change might seem negligible. For the professional gambler, however, it could be a death knell. The world of professional poker and high-volume sports betting operates on razor-thin margins. Success isn't about winning every hand or every bet; it's about achieving a small, positive return over a massive volume of wagers.

A professional poker player's success rate is often measured by their return on investment (ROI), which can be as low as 5-10% for a highly skilled player grinding out a living. As explained by poker pro Phil Galfond, a player who nets $200,000 in profit might have actually won $3 million and lost $2.8 million over the course of a year. Under the new law, their deductible losses would be capped at $2.52 million (90% of $2.8M), creating a taxable income of $480,000 on their $200,000 profit. As Forbes points out, after federal and state taxes are paid on this inflated income, the player could easily end up with a net loss for the year. This untenable financial reality threatens to make professional gambling in the United States a thing of the past, pushing serious players to offshore, unregulated markets.

A Cooling Effect on the Betting Boom

While the immediate impact is on the gamblers themselves, the secondary effects could severely hinder the sports betting ecosystem that leagues and teams have come to rely on. The industry's growth has been fueled by a constant influx of marketing, promotions, and a user-friendly experience. If the fundamental economics of betting become unattractive, that growth could stagnate or even reverse.

Compounding this federal issue are new, aggressive state-level tax measures. In Illinois, for example, a new law imposes a per-wager tax on sportsbooks: 25 cents for the first 20 million bets and 50 cents thereafter. In response, major operators like FanDuel have already begun passing this cost directly to consumers by adding a 50-cent surcharge on every bet placed in the state, as reported by CNBC.

This kind of "nuisance tax" disproportionately affects the recreational, small-stakes bettors who make up the bulk of the market. A $10 bet suddenly comes with a 5% fee before it even has a chance to win or lose. This de-incentivizes casual participation and could lead to a significant drop in overall betting volume. For sports leagues, teams, and media companies that have signed lucrative partnership deals with betting sites, a decline in active users and total handle translates directly to diminished revenue. The firehose of cash from gambling partnerships could slow to a trickle if the user base erodes.

The combination of the "Big Beautiful Bill's" phantom income tax and aggressive state-level taxation creates a worrying forecast. Lawmakers, including Nevada's Representative Dina Titus, are already working to reverse the federal provision, arguing it will push players to the unregulated black market, as noted by CNN. But the damage may already be done. The sports world's all-in bet on gambling revenue looked like a sure thing, but with these new rules, it seems the house, in this case, the government, is changing the odds mid-game, and the entire industry may soon be paying the price.

Merchandise

The Survival of the Wackiest

The outlandish tenor of Minor League Baseball isn’t just fun-loving antics. It’s driven by the economics of the sport.

MiLB teams’ finances differ from MLB teams not only in size but in composition. In particular, minor league teams receive a significantly lower percentage of their revenue from national and regional media deals and major sponsors. They do have some streaming and local broadcast revenue, but it is a relatively small contribution to the overall financial pie. Sponsors tend to be local businesses rather than recognizable and deep-pocketed national brands. On the cost side, affiliated minor league teams’ player and coach payrolls are paid by the MLB parent, and the teams only carry the operating costs. The 87 independent minor league teams don’t get this cost coverage. But in general, the bottom lines of minor league teams are more dependent on ticket sales, merchandise sales, and F&B than the typical MLB team.

Within this financial context, the ever-revolving roster of players and the relatively scant attention paid to standings and playoffs mean that minor league teams need to emphasize local spirit and high entertainment value more than on-the-field performance to generate sales. That makes sense of the wackiness that seems to define minor league baseball. 

Unique Identities

Instead of carrying the legacy names of their MLB affiliates, most minor league teams adopt more fun-loving names such as:

Jacksonville Jumbo Shrimp (Miami Marlins)

Sugar Land Space Cowboys (Houston Astros)

Rocket City Trash Pandas (Los Angeles Angels)

Wichita Wind Surge (Minnesota Twins)

There are two reasons for this. One is to establish a stronger connection with the hyper-local fan base that dominates attendance. A unique name helps connect to local history and identity rather than the borrowed association of another town. It also drives more apparel sales. Whether you’re a nearby fan or a one-time visitor, you’re more likely to want a Rocket City Trash Panda jersey than a Huntsville Angels variation.

This also leads to frequent “temporary rebrands” that give another reason to collect unique merchandise from the local teams. For example, the Solar eclipse in 2024 gave rise to the Lehigh Valley IronPigs and the Rochester Red Wings taking the field as the Space Pigs and Moon Rocs for a three-game series in their take on this successful technique for driving incremental purchases..

Signature Concessions

With a larger percentage of revenues coming from in-stadium sales, teams highlight unusual or namesake food offerings that make for must-try items. That’s why the Chicago Dogs offer a 3-foot-long hot dog as part of their menu, and the "Taco Truck Throwdown" has been a seasonal highlight of the Fresno Grizzlies since 2011. The "Litter Box Sundae" (Omaha Storm Chasers), the "Spicy Chicken Donut Sandwich" (Hartford Yard Goats), and the "Sweet Pig Burger" (Lehigh Valley IronPigs) typify local over-the-top signature items.

Many minor leagues began to offer curbside food pick-up to survive the COVID shutdown. Many continued the service post-COVID as an alternate way to drive food revenue outside the ballpark. Teams like the Charleston RiverDogs even started a team food truck that travels around town and can be booked for events. Making the food one of the star attractions helps drive F&B revenue. 

In-Game Promotions

Minor League teams are known for the constant promotional activities going on between innings during the game. That’s because, without the celebrity of famous players or the prospect of a World Series run, teams must rely on a great game experience to attract fans. A parade of theme nights, giveaways, and quirky stunts helps create a memorable outing that’s not as dependent on the outcome on the field. As a testament to that dynamic, the very same Lehigh Valley IronPigs mentioned above led the MiLB in home attendance in 2024 with 588,788 fans despite a 68-78 record.

“Big-time” sports tend to eschew some of these tactics as unbecoming of elite professional athletics. But OKC built an impressive following for the Thunder based on embracing a small-town mentality. The focus on driving fan identification and embracing the fun inherent in sports should not be lost on franchises at any level. 

By The Numbers

Numbers That Jumped Off the Page

$13.50- Due to weak demand and disappointing attendance, FIFA was forced to dramatically cut ticket prices for the Club World Cup. For a semifinal match between Chelsea and Fluminense, prices dropped from over $470 to as low as $13.40. The early bird doesn’t always get the worm, it seems.

$700,000- How does a hockey program that was a club team a little over a decade ago cap off its best season ever? Penn State’s answer seems to be to offer a boatload for the game’s top prospect in Gavin McKenna. Coming off an appearance in the Frozen Four, the program hopes the $700,000 will push them to a title.

$10 Million- U.S. soccer star Catarina Macario has signed a landmark 10-year, $10 million sponsorship deal with Nike. This partnership is among the richest ever for a female soccer player, a sport where shoe contracts typically run in the mid-five figures.

Pulse Check

Last week, we asked BTS readers, “Which team would you be most shocked to see leave their historic stadium?” Here’s what they thought.

The Highlight Reel

Catch up on our most-read articles from previous weeks

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