FAIR BET Act: A Regulatory Reset for U.S. Gaming Stocks and the Road to Higher Valuations

The FAIR BET Act, a bipartisan-driven legislative effort to reverse the One Big Beautiful Bill Act's (OBBBA) controversial 90% cap on gambling loss deductions, is poised to reshape the U.S. gaming sector's regulatory landscape. For investors, this policy shift represents a critical inflection point for companies like MGM Resorts (MGM) and Wynn Resorts (WYNN), which operate in Nevada—the epicenter of regulated gambling. By eliminating the “phantom income” tax burden created by the OBBBA's deduction limit, the Act could reduce compliance risks, stabilize revenue streams, and unlock pent-up growth for the sector.

The Regulatory Uncertainty Trap

The OBBBA's 90% deduction cap, set to take effect in 2026, has created a ticking time bomb for U.S. gamblers and operators alike. Under current rules, a gambler with $100,000 in winnings and losses would face $10,000 in taxable income—a “phantom gain” that incentivizes black-market activity or tax evasion. For casinos and online platforms, this dynamic risks diverting customers to unregulated offshore sites, eroding their market share and revenue.

The FAIR BET Act seeks to eliminate this distortion by restoring the pre-OBBBA 100% deduction. With bipartisan support from lawmakers like Rep. Dina Titus (D-NV) and Rep. Troy Nehls (R-TX)—a rare alignment in today's polarized Congress—the bill has cleared an initial hurdle but faces a steep climb through the House Ways and Means Committee. Passage would remove a key regulatory overhang, potentially boosting investor confidence in gaming stocks.

Why Nevada Operators Are Ground Zero

Nevada's gaming giants, including MGM Resorts and Wynn Resorts, stand to benefit disproportionately from the FAIR BET Act. These companies rely heavily on high-stakes gamblers, whose tax compliance and loyalty could falter under the OBBBA's rules. For instance, a professional gambler facing a $10,000 “phantom tax” on a breakeven year might shift activity to jurisdictions with more favorable tax regimes or underground markets.

Note: A divergence in MGM's stock from the broader consumer sector could reflect investor anxiety over regulatory risks tied to the OBBBA.

Restoring the full deduction would mitigate these risks, allowing casinos to retain customers and stabilize revenue. For Wynn Resorts, which derives nearly half its revenue from Las Vegas, the Act's passage could also alleviate concerns about declining visitation from high rollers deterred by tax complexity.

The Sector's Growth Potential: A Tax Policy Catalyst

Beyond immediate compliance risks, the FAIR BET Act's success could reignite growth in the U.S. gaming sector, particularly for online platforms. The OBBBA's 90% cap has already spurred calls for offshore migration, but reversing it would keep capital and activity within regulated markets. This could boost the valuation of operators like Penn National Gaming (PENN) and DraftKings (DKNG), which depend on a compliant, tax-efficient environment.

A potential dip in 2026 revenue if the deduction cap takes effect could reverse with FAIR BET's passage, creating a clear earnings catalyst.

Investment Implications: Timing the Regulatory Cycle

The FAIR BET Act's legislative timeline is critical. With the OBBBA's rules set to take effect in 2026, Congress has less than a year to act. Investors should monitor the bill's progress through committee hearings and markups, which could begin as early as Q1 2026.

• Bull Case (Act Passes): Gaming stocks rally as regulatory uncertainty fades. MGM and Wynn, with their Nevada exposure, could see multiples expand as earnings stability improves.
• Bear Case (Act Stalls): The “phantom tax” drags on margins, prompting capital shifts to offshore markets. Online operators might underperform as unregulated competition gains traction.

Final Take: A Buy Signal for Nevada-Heavy Gamblers

The FAIR BET Act is no longer just a policy debate—it's a material driver of value for U.S. gaming stocks. For investors, the path forward is clear: overweight positions in Las Vegas-based operators like MGM and Wynn now, with the caveat that legislative success is still uncertain. The bipartisan support and industry advocacy (backed by the American Gaming Association) bode well, but investors must remain vigilant for setbacks.

In a sector historically punished by regulatory volatility, the FAIR BET Act offers a rare opportunity to lock in long-term gains. The dice are rolling—place your bets wisely.