Ahead of the April tax filing deadline, it’s worth noting that Bitcoin mining and cryptocurrency gambling still fall within the income tax bracket and face “burdensome” double taxation.
Currently, the US tax watchdog, the IRS (Internal Revenue Service), taxes gambling rewards immediately upon receipt as income and again if sold later under the capital gains tax.
in a letter Last December, a group of lawmakers led by Mike Carey asked Scott Bessent, Treasury Secretary and Acting IRS Commissioner, for clarity on the tax treatment of crypto betting.
Lawmakers called the current tax regime “burdensome” and out of touch with the underlying design of betting.
“American taxpayers face a participation tax regime that is burdensome to comply with, difficult to manage, and out of step with the priorities of this Administration.”
They added,
“While the ruling offers initial insight into the treatment of gambling rewards, it does not accurately reflect the underlying technological and economic realities of gambling and diverges from fundamental principles of tax law.”
Source: House
According to lawmakers, correcting the tax ruling would contribute to future deliberations on how to address the taxation of digital assets, along with a boost.
But more than a month later, the IRS has not responded to the letter and the IRS’s loophole will continue through 2026 unless its previous guidance is corrected.
Alternative push for cryptocurrency tax
Still, there have been attempts to address this issue through alternative proposals.
It’s worth noting that the Carey-led push for clarity came after pro-cryptocurrency Senator Cynthia Lummis’ tax. amendment on ‘Big Beautiful Bill’ was not approved.
After the failed attempt in July, Lummis introduced a dedicated system bill to address the same issue, but has not yet left committee as of this writing.
In October, the Senate Finance Committee held a series of hearings with industry representatives.
In fact, in one of the meetings with Coinbase’s Vice President of Taxes, Lawrence Zlatkin, argument that investors are avoiding US validators or stakers due to the tax burden.
“This uncertainty pushes investors to avoid US validators altogether. That outcome would be disastrous for US competitiveness.”
These hearings were considered the basis for making informed decisions on future bills to address the tax issue.
In fact, some of these deliberations, including stablecoin exemptions for small transfers, have presented in the broader market structure bill, the CLARITY Act.
Overall, there is no final law for the cryptocurrency tax in early 2026. And the current uncertainty over the market structure bill could also cloud the prospects for near-term relief.
However, guidance from the IRS to correct the current tax regime may still help solve the problem.
Final thoughts
- The current US regime taxes cryptocurrency betting twice, with critics calling it “burdensome” and uncompetitive.
- There are alternative policy solutions to the problem, including through the CLARITY Act, but only IRS guidance can correct it without major legal changes.
