It’s important to note that both federal and, in some cases, state taxes are levied on gambling winnings. Failing to report these winnings can have legal consequences, including potential prosecution for felony tax evasion, although such a scenario is rare. The federal gambling winnings tax rate is 25%, and several states consider gambling winnings as taxable income. However, it’s worth noting that gambling losses can typically be deducted up to the amount of your winnings, allowing you to benefit from this aspect of legal sports betting.