Missouri's New Sports Betting Framework Brings New Tax Liabilities

Missouri’s sports betting market launched on Dec. 1, making it the 39th state to allow legal sports betting. The expansion gives people more ways to have fun, but it also adds tax responsibilities that many gamblers may not fully understand. 

Section 61 of the Internal Revenue Code says that all income is taxable, no matter where it comes from. This means that the same rules apply to money won from gambling on Missouri sports betting apps as they do to wages or money found.

Taxpayers must track their Missouri sports betting activity, even if they do not receive official tax documents from operators. The IRS requires providers to issue forms only when winnings exceed $600 and are at least 300 times the initial wager. 

These thresholds exclude a significant portion of bettors from automatic reporting, but the obligation to pay taxes remains. Operators organize account histories, making it easier for users to compile records for annual filings.

Residents will also face a new limitation beginning in the second month of the market. A provision in the One Big Beautiful Bill Act of 2025 caps the miscellaneous itemized deduction for sports betting losses at 90%, reducing how much bettors can claim against their winnings. 

This change requires Missourians to closely review their deductions as they adjust to the tax rules surrounding legalized sports betting.

Prop bet restrictions and integrity concerns

Missouri's launch also introduces new rules on the types of bets that can be made, especially prop bets on how well individual athletes perform. Residents can place player-specific wagers, but you won't find Missouri sportsbook promos - and you can't bet - on contests featuring athletes from Missouri colleges or universities. 

The restriction follows national concerns about the vulnerability of prop bets as they become more prevalent in legalized sports betting. Integrity issues have intensified in recent months amid several high-profile scandals. 

Two MLB pitchers were charged with accepting bribes linked to pitch selections, and an NBA player was arrested for allegedly supplying inside information to bettors. In addition, the NCAA revoked the eligibility of six men's basketball players accused of manipulating in-game performance. 

As prop wagers increase, operators have seen their revenue rise. The American Gaming Association reported that operators generated more than $11 billion in the first three quarters of the year, up more than 13% from the same period last year. 

Although national data on prop bet usage remains limited, industry groups said these wagers are becoming a larger part of the overall betting landscape.

Major leagues have responded by tightening oversight. Ahead of Missouri's debut, the NFL reiterated its opposition to several prop bet categories in a memo to team officials, outlining concerns related to prediction market platforms and highlighting efforts with regulators to limit wagers susceptible to manipulation. 

These include those tied to officiating calls, injuries, fan interference, or single-play actions. The NBA and its sportsbook partners have taken similar steps, instructing operators to remove wagers based on individual errors, including missed free throws, fouls, and turnovers.