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How is crypto gambling taxed?

While some may describe investing in crypto as a gamble, that’s not the focus of today’s blog post. Today, we’ll be looking at crypto gambling: how it works, what it involves, and how it may be taxable in your region.

Crypto gambling is exactly what it sounds like: combining the more traditional world of gambling with the use of crypto assets. As crypto gambling has grown in popularity, so has the number of ‘crypto casinos’. There are online platforms (termed ‘casinos’) that enable users to bet their crypto assets for a chance of winning.

Typically, these online crypto casinos consist of similar games as a normal casino: slots, poker, lotteries and more. In the traditional casino world where you would place a bet with fiat currency, you do the equivalent on these sites by provide funds via your crypto wallet.

What to be wary of with crypto gambling

It’s important to note that with the increase in crypto gambling’s popularity, there’s also been growth in the amount of fraudulent crypto gambling sites. Malicious sites like these attempt to steal assets from the user, whether by not letting you withdraw your winners, creating malignant smart contracts that drain funds, and more.

Always make sure to do your own research to ascertain whether or not a crypto gambling site is reputable before engaging with it.

How is crypto gambling taxed in Australia?

In Australia, there is limited guidance on the tax treatment of crypto gambling and any subsequent rewards. This article from November 2020 states that both depositing funds in the form of crypto assets into a crypto gambling site, and receiving rewards in the form of crypto assets from a crypto gambling site, will both constitute capital gains tax events. This means that if you’re an Australian taxpayer engaging in crypto gambling, you’ll need to track the value, cost basis, and any associated gain or loss, relating to those transactions. We recommend talking to a local accountant if you need clarity on how to treat any crypto gambling transactions.

How is crypto gambling taxed in the US?

In the US, the federal government does not have laws explicitly outlawing or legalizing gambling with Bitcoin or other cryptocurrencies. That said, gambling is heavily regulated at the state level with most states having laws that make gambling with crypto either illegal or heavily restricted. It’s important to research the legality of participating in crypto gambling based on where you reside.

If crypto gambling is permitted in your region in the US, then it’ll likely be taxed as ordinary income at a federal and state level upon receipt. This means it’ll need to be reported as “other income” on your Form 1040. On top of this, if you go on to dispose of any crypto assets earned via gambling, capital gains tax may also come into effect. We recommend talking to a local tax professional to get clarity on how to accurately record crypto gambling transactions in your region.

How is crypto gambling taxed in the UK?

Typically in the UK, gambling winnings are not taxable. However, there is the possibility that if you cash out any winnings from gambling activities (either traditional or crypto-native) in the form of crypto assets instead of fiat currency, this may change things. Any gambling winnings earned in the form of crypto assets will need to be tracked for tax purposes, as future disposal events will be relevant for capital gains tax. The HMRC states that ‘where a customer considers that their transactions involving cryptoassets amounted to gambling, please make a referral following the process at CRYPTO100500. We recommend working with a local tax professional to determine what processes to follow when engaging with crypto gambling.

Other regions

If we haven’t mentioned your region specifically in this blog article, we recommend talking to a local tax professional. They will be able to help you determine what the most appropriate treatment of your crypto gambling transactions are for tax purposes in your region.

How can CryptoTaxCalculator help

A key takeaway from this article is that regardless of the tax consequences of your crypto gambling activity, there is an almost certain chance that you will need to be able to record the details of any related transaction for future use. That’s where we come in! Our algorithm will help categorize buys, sells, and cost bases relating to your crypto gambling activity so that you won’t have to manually track these values. Any gains, losses, and relevant cost bases made in conjunction with your crypto gambling winnings would also be taken into account when generating your final tax reports for a specific financial year.

The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Cryptotaxcalculator disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.

Samara LeMerle

Strategy and Communications Manager

Samara has been working in the crypto industry for the last 3 years and is passionate about helping other crypto users learn about the tax implications of their trading activity.

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