Crypto Gambling Winnings & Taxes: 9 Facts You Need to Know

Written by:

Harsha

May, 24, 2024

Table of Contents

How Much Tax Do You Pay on Crypto Gambling Wins?
Global Crypto Gambling Tax Regulations
Tax Evasion and Legal Implications for Crypto Gambling Winnings
Conclusion

Crypto gambling is an online platform powered by cryptocurrency transactions, with Bitcoin being the most widely used digital currency. Like traditional online casinos, these platforms offer a wide selection of games, including roulette, blackjack, and classic slots.

Gains from cryptocurrency transactions, including mining, trading, and receiving payments, are typically taxable like those from traditional assets. However, the taxation of winnings from crypto casinos may differ, with varying regulations depending on the country’s tax laws.

This article delves into the complexities of how you pay tax on your crypto gambling wins while also highlighting the serious consequences associated with tax evasion.

How Much Tax Do You Pay on Crypto Gambling Wins?

Cryptocurrency taxation varies widely depending on your location. In the US, it is treated as property and subject to capital gains tax (CGT). The UK imposes CGT on crypto disposals, which is considered miscellaneous income in Japan. Understanding your local tax laws is crucial to avoid penalties for non-compliance.

The next section will explore various global regulations regarding crypto gambling tax impositions.

Global Crypto Gambling Tax Regulations

The rise in popularity of crypto gambling reflects the growing trend of investing in digital currencies. Crypto gaming has attracted many people who want to use and accumulate more digital assets. While some nations welcome this revolution in the GameFi industry, others restrict their citizens’ ability to engage in online gambling.

The legality of cryptocurrency and crypto gambling remains uncertain without precise laws governing cryptocurrencies. Nonetheless, several areas have taken steps to legalize cryptocurrency gaming, greatly increasing its popularity.

Here is a table summarizing the legality and tax imposition on crypto gambling in various countries:

CRYPTO GAMBLING LEGALITY AND TAX IMPOSITION IN VARIOUS COUNTRIES
Country	Is Crypto Gambling Legal?	Is Crypto Gambling Taxed?
United States	Yes	Yes
United Kingdom	Yes	No
Japan	Yes	Yes
Canada	Yes	No
Australia	Yes	No

Bitcoin gambling winnings are taxable income in many countries, including the US. The tax regulations that apply to traditional fiat currency gambling also apply to cryptocurrency gambling, even if there may not be any explicit tax advice on the subject.

This data implies that any earnings from cryptocurrency gambling must be declared taxable income. Cryptocurrency winnings are taxable income and must be declared on your tax return, just like earnings from land-based casinos.

Continue reading for a detailed discussion of how taxes on crypto gambling earnings work in several countries.

1. How Much Tax Do You Pay on Crypto Gambling Wins in the US?

The Internal Revenue Service (IRS) is responsible for taxing cryptocurrencies, especially sales and purchases of goods and services. Depending on an individual’s income level, short-term and long-term capital gains may be subject to 0%, 15%, or 20% tax rates.

Winnings from crypto gaming are considered income by the IRS since they are treated as digital assets. The value of the winnings in US dollars at the time of receipt determines this. Any profit you make while selling your cryptocurrency is subject to capital gains tax.

Did You Know

Online casinos usually offer payout rates ranging from 96% and higher. With this statistic, players can earn 96 cents for every dollar they wager.

Crypto gambling winnings are subject to the taxpayer’s marginal tax rate and must be reported on Form 1040 Schedule 1. The IRS must receive reports of all gambling earnings, including those from cryptocurrency gaming.

There are two types of capital gains taxes in the US. You are subject to short-term capital gains tax if you have owned your cryptocurrency tokens for less than a year. This tax rate is in line with the income tax rate that investors pay, which can vary according to their annual income and can be anywhere from 10% to 37%.

The long-term capital gains tax rate is variable and depends on your income level. It is 0% for people making up to $44,625 annually, 15% for people making up to $492,300 annually, and 20% for anyone making more than $492,300 annually. You are subject to long-term capital gains tax if you have owned your cryptocurrency tokens for over a year.

In the US, tax evasion is a serious crime, and those who willfully avoid paying taxes may face severe consequences from the federal government. Here’s a table of tax evasion cases and their corresponding penalties.

TAX EVASION PENALTIES IN THE UNITED STATES
TAX EVASION CASES	FINE	IMPRISONMENT
Fraud and Tax Evasion	Up to $100,000	Up to five years
False Tax Return	Up to $100,000	Up to three years
Failure to File a Tax Return	$25,000 for each year of missed files	Up to one year
Failure to Pay Estimated Tax or Keep Records of Items Claimed	$25,000	Up to one year
Concealing Offshore Bank Accounts	Up to $500,000	Up to ten years

2. What Percentage of Tax Do You Pay on Crypto Gambling Wins in The United Kingdom?

Winnings from gambling are usually not taxed in the UK unless they serve as your main source of income. Your tax liability can change if you transfer your gambling winnings into cryptocurrency rather than fiat money.

There is no specific Bitcoin or cryptocurrency tax in the UK. The type of transaction determines how your cryptocurrency is taxed. If you are earning income, you must pay income tax. If you are making capital gains, you must pay capital gains tax.

When you dispose of cryptocurrency in the UK, you are subject to capital gains tax because it is treated like a capital asset. Disposal includes selling or trading crypto and purchasing goods and services.

Based on your total income, cryptocurrency capital gains are subject to 10% or 20% taxation. You will pay a 10% tax on profits under £50,270 and a 20% tax on earnings above £50,270.

Here’s how to use paper forms to file your crypto taxes:

STEP-BY-STEP GUIDE ON HOW TO FILE CRYPTO TAXES USING PAPER FORMS

Compute your cryptocurrency taxes, considering income, spending, capital gains, and losses.
If you haven’t already, sign up for online tax filing through the Government Gateway program by October 5, 2024.
Fill out Form SA100, Self Assessment Tax Return, and disclose any cryptocurrency income in box 17.
If you have any cryptocurrency capital gains, check the box labeled “yes” in box 7 and complete the additional Self Assessment: Capital Gains Summary (SA108).
Send in your Self Assessment Tax Return to HMRC online by midnight on January 31, 2025.

3. What Tax Percentage Applies to Crypto Gambling Winnings in Japan?

Online gambling taxes in Japan are usually payable on winnings exceeding 500,000 yen. You are legally required to pay taxes when you earn more than 200,000 yen from using Bitcoin or any other cryptocurrency at an online casino.

Winnings from gambling, including cryptocurrency gambling, are subject to taxation as miscellaneous income. This covers profits from the sale of cryptocurrencies and money earned from mining and staking. Your overall income determines the tax rate, which ranges from 5% to 45%.

INCOME TAX RATES IN JAPAN
Tax Bracket (JPY)	Tax Rate
< 1.96m	5%
1.95m to 3.3m	10%
3.3m to 6.95m	20%
6.95m to 9m	23%
9m to 18m	33%
18m to 40m	40%
40m and above	45%

Since cryptocurrency trades are private sales, income tax rates on these transactions can go as high as 45%. If your gains from cryptocurrency trading are above €600, taxes are due within a year of the sale. Taxes are also applied to cryptocurrency acquired through lending and mining activities.

In Japan, taxes are normally due when you earn or dispose of cryptocurrency. Earning cryptocurrency causes income recognition depending on its fair market value at receipt; this includes profits from airdrop revenue, mining, and staking rewards.

Taxpayers may choose between online and paper-based reporting of crypto income for taxation purposes. Choosing online reporting involves using the National Tax Agency’s online portal, which provides a quick and easy means of electronically submitting tax data. However, those who would instead use paper forms can report any other income, including cryptocurrency profits, by completing Form A.

4. How Much Tax Do You Pay on Winnings in Crypto Gambling in Canada?

The Canada Revenue Agency (CRA) considers cryptocurrency gambling earnings taxable income. If the business is deemed a business, 100% of profits are taxable. Only half of the earnings are taxable if the investment is treated as a business.

While capital gains from cryptocurrency are taxed, winnings from crypto gambling are usually tax-free. This is especially important for cryptocurrency gambling because of the asset’s volatility. However, earnings are usually not taxable if gambling isn’t your main source of income.

Additionally, gains from gambling are usually not taxable and are not subject to a particular tax rate unless considered a business activity. If cryptocurrency gaming winnings are seen as a component of commercial activity, they need to be recorded.

5. Crypto Gambling in Australia: How Much Tax Do You Pay on Your Winnings?

Winnings from cryptocurrency gambling are not subject to particular tax rates unless determined to be part of a business activity. However, you can be required to pay capital gains tax on your earnings if you win cryptocurrency through gaming. Cryptocurrency will appreciate when you sell it or convert it to fiat money.

The Australian government classifies cryptocurrencies, such as Bitcoin, as property subject to capital gains tax restrictions. This classification covers digital assets, including tokens, coins, NFTs, and stablecoins. However, depending on the nature of the transaction, cryptocurrency earnings can be considered extra income and subject to income tax.

Important Note:

If you keep your cryptocurrency for over a year, you will receive a 50% capital gains tax deduction.

Individual investors must pay the net capital gain at their income tax rate when selling, trading, donating, or spending cryptocurrency in Australia. The entire income for the tax year determines the tax rate.

INCOME TAX ON CRYPTO IN AUSTRALIA
Income	Tax Rate
$0 – $18,200	0%
$18,201 – $45,000	Nil + 19% of the excess over $18,200
$45,001 – $120,000	$5,092 + 32.5% of the excess over $45,000
$120,001 – $180,000	$29,467 + 37% of the excess over $120,000
$180,001+	$51,667 + 45% of the excess over $180,000

Tax Evasion and Legal Implications for Crypto Gambling Winnings

Tax evasion related to cryptocurrency gambling has serious legal consequences. Each jurisdiction has its tax laws governing earnings from cryptocurrency gaming, and noncompliance can result in fines, penalties, and sometimes even legal action from tax authorities. The jurisdiction and the quantity of undeclared income can affect how severe these consequences are. Compliance with tax regulations is essential to avoid legal issues.

Here are some of the countries that are strict in implementing crypto gambling tax evasion and imposing punishment.

Crypto Gambling Tax Evasion Imposed punishment

1. Crypto Tax Laws in The United States

In the US, fines and interest on overdue taxes are imposed for failing to report gains from gaming, including cryptocurrency gambling. Underpayment of taxes or incorrect tax return filing could result in penalties for taxpayers. The Internal Revenue Service (IRS) has enforcement mechanisms to detect and penalize non-compliance.

The IRS imposes significant penalties on tax evaders. In addition to paying owed taxes, evaders risk fines of up to 75% of the entire amount owed, capped at $100,000 for individuals. Negligence is punished with a 20% penalty for understating income. Interest is also charged on these penalties.

Fun Fact

Crypto gamblers increased dramatically after cryptocurrency adoption spread widely. The industry grew 4% in 2023, according to statistics. By 2029, it is estimated that the crypto-gambling industry will be worth $136.3 billion.

2. How The United Kingdom Tax Crypto Laws

Gaming profits in the UK, including cryptocurrency gambling wins, are often not taxed unless they are your primary source of income. However, there can be fines and interest associated with not disclosing other taxable income, like capital gains from cryptocurrency investments. To comply with tax rules, taxpayers must appropriately record any cryptocurrency-related income.

A summary conviction for income tax evasion carries a maximum fine of £5,000 and a sentence of six months in jail. Severe instances carry a maximum sentence of seven years in prison. If the avoided tax is not paid back, the penalties can get worse with unlimited fines.

3. Is Australia Strict with its Crypto Gambling Tax Laws?

Australia has tight laws against internet gambling and mandates that taxpayers disclose all income sources, including cryptocurrency gambling profits. The Australian Taxation Office (ATO) may impose penalties and conduct audits if such income is not reported. Taxpayers must comply with tax laws and accurately report their gambling income to avoid legal consequences.

Federal tax offenses in Australia are governed by the Criminal Code Act of 1995 and carry a severe punishment of up to ten years in jail. The maximum penalty of 200 penalty units and two years in prison is associated with these fines, determined by the taxpayer’s actions and the amount of tax evaded.

4. Japan’s Cryptocurrency Laws

Cryptocurrencies are taxable in Japan since they are deemed property by the National Tax Authority (NTA). Winnings from bitcoin gambling are considered miscellaneous income in Japan and are subject to taxes. The tax rates vary based on the individual’s income, ranging from 5% to 45%. These winnings are added to other irregular sources of income when computing taxes. Players must include their cryptocurrency gambling winnings in their taxable income and report them to the National Tax Agency.

Depending on the seriousness of the act and the amount of tax evasion, there are different penalties for tax evasion connected to cryptocurrency gaming in Japan. Penalties for tax evasion typically consist of fines, jail time, or both.

Related

Each country or region has a specific way of dealing with gambling, especially related to cryptocurrencies. Understanding the laws of each country regarding crypto gambling is crucial if you plan to play in online casinos using cryptocurrencies.

Conclusion

Crypto gambling and cryptocurrency assets function in legal gray areas in many nations, enabling players to engage in activities like rapid withdrawal crypto casinos without clear legal prohibition. Players must understand the regulatory environment in their jurisdictions. The legality of cryptocurrency casinos varies greatly between nations; therefore, it’s important to follow local rules to avoid legal issues.

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