Proposition bets are legal in the roughly 38 states and the District of Columbia that have authorized sports wagering, but only when you place them through a sportsbook licensed in the state where you are physically located, and only on the specific bet types that state permits. A prop bet that is perfectly legal in one state can be banned outright next door. So the real question is not whether prop betting is legal in the abstract but whether the particular wager you want to make is allowed where you are.
What a Prop Bet Is
Regulators sort prop bets into two buckets. A performance-based prop ties to an individual athlete’s statistics, like a quarterback’s passing yards or a forward’s point total. An event-based prop targets something that happens during the game without depending on any player’s stats, such as which team wins the opening coin toss or whether a specific penalty gets called.
The split matters because states treat skill-driven props differently from chance-driven ones. A bet on a pitcher’s strikeout total rests on analyzable data: matchup history, recent form, lineup splits. A coin toss is pure randomness. Many jurisdictions apply tighter scrutiny to chance-based props because at some point they stop looking like sports wagering and start looking like a lottery.
Where Prop Bets Are Legal
Until 2018, the Professional and Amateur Sports Protection Act kept most states from authorizing sports betting at all. The Supreme Court struck PASPA down in Murphy v. National Collegiate Athletic Association, holding that the federal law violated the anti-commandeering doctrine.1Supreme Court of the United States. Murphy v. National Collegiate Athletic Association That ruling did not legalize sports betting everywhere. It cleared the way for each state to decide for itself, which is why the current map is a patchwork rather than a single national rulebook.
If your state has legalized sports betting, you can place prop bets through a licensed operator while you are inside the state’s borders. Every legal online sportsbook uses geofencing to confirm your location before accepting a wager, and operators have to block attempts from outside the state. That requirement traces back to the federal Wire Act, which makes it a crime for anyone in the betting business to use wire communications to transmit bets across state or international lines, with penalties of up to two years in prison.2Office of the Law Revision Counsel. 18 USC 1084 – Transmission of Wagering Information Penalties The practical upshot: a legal sportsbook cannot take your wager if you drive across the state line, and you cannot legally bet with an in-state book while traveling.
Prop Bets Your State Probably Won’t Let You Make
Even in states where sports betting is fully legal, the catalog of allowed props is narrower than many bettors expect.
College Player Props
Roughly 15 states explicitly ban individual performance props on college athletes, and others restrict betting on games involving in-state universities. Regulators who have addressed this publicly point to documented increases in threats and harassment aimed at student athletes as the betting market has grown, along with concerns that unpaid or modestly compensated players are more exposed to bribery attempts on a specific stat line.
Spot-Fixing Props
States commonly prohibit props on events a single participant could easily engineer without obviously throwing the game: the first foul of a basketball game, the first penalty in a soccer match, and similar micro-level outcomes. Some jurisdictions ban these outright. Others require operators to submit each one for individual approval before offering it. The concern is the low cost of corruption and the difficulty of detecting it.
Entertainment and Non-Sporting Props
Most states limit licensed sportsbooks to athletic events. A handful allow fixed-odds betting on entertainment award shows, and federally regulated prediction-market platforms offer contract-based trading on similar outcomes in a wider set of states. The regulatory worry with award-show props is that outcomes decided by small panels of voters make insider information unusually valuable and unusually hard to detect.
When a Prop Bet Crosses Into Illegal Territory
A prop bet placed through a licensed in-state operator is lawful. The same bet routed through an offshore or unlicensed site is not. The Unlawful Internet Gambling Enforcement Act bars anyone in the betting business from knowingly accepting credit, electronic fund transfers, checks, or other financial instruments connected to unlawful internet gambling.3Office of the Law Revision Counsel. 31 USC 5363 – Prohibition on Acceptance of Any Financial Instrument for Unlawful Internet Gambling Banks and payment processors are required to identify and block transactions tied to illegal gambling sites, which is one reason deposits to offshore sportsbooks frequently fail or get flagged.
Match-fixing is its own federal problem. Under the Sports Bribery Act, 18 U.S.C. ยง 224, anyone who carries out, attempts, or conspires in a scheme to influence a sporting contest by bribery faces up to five years in federal prison, for amateur and professional events alike.4Office of the Law Revision Counsel. 18 USC 224 – Bribery in Sporting Contests That statute is the federal tool used against spot-fixing schemes where someone bribes a single athlete to underperform on a measurable stat the prop market is tracking.
What You Owe If You Win
The IRS treats all gambling winnings as taxable income. Two numbers matter most for prop bettors.
Reporting and Withholding
For the 2026 calendar year, a sportsbook must file a Form W-2G when paying out winnings of $2,000 or more, if the payout is at least 300 times the amount wagered. That $2,000 figure is an increase from the prior $600 threshold, so you may see fewer W-2G forms on small payouts than you used to. When winnings minus the wager exceed $5,000 and the 300-to-1 ratio is met, the operator must withhold 24% for federal income tax before paying out.5Internal Revenue Service. Instructions for Forms W-2G and 5754 Winnings below those thresholds are still taxable; you just have to report them yourself.
The 90% Cap on Loss Deductions
Starting with the 2026 tax year, the deduction for wagering losses is capped at 90% of what you actually lost.6Office of the Law Revision Counsel. 26 USC 165 – Losses The remaining 10% is non-deductible. The deduction is also still capped at your total gambling gains for the year, so losses cannot shelter other income. The cap applies to casual and professional gamblers alike, and joint returns are subject to the same 90% limit on combined losses.7Federal Register. Increase in Threshold for Requiring Information Reporting With Respect to Certain Payees Extension and Modification of Limitation on Wagering Losses
In practice: if you win $10,000 on prop bets and lose $10,000 over the same year, you might expect the two to cancel out. Under the new rule, you can deduct only $9,000 of those losses. You owe federal income tax on the remaining $1,000 even though you broke even in real dollars. Bettors who place a high volume of wagers across a season feel this most.
State Income Tax
Most states with legal sports betting also tax winnings as ordinary income. Rates range from zero in states with no income tax to over 13% at the top. Some states let you deduct gambling losses on your state return; roughly a dozen tax gross winnings with no loss deduction at all. In a state in the latter group, you can owe state tax on your total winnings even in a year you lost more than you won.
If Betting Becomes a Problem
Every state with legal sports betting runs a self-exclusion program. You can add yourself to a list that bars you from placing wagers through any licensed operator in that state, with exclusion periods generally running from one year to a lifetime ban depending on the jurisdiction and the way you enroll. Once you are on the list, operators have to block your account and refuse to pay any wagers you still manage to place. Most states require the operator to forfeit winnings from a self-excluded bettor’s wagers, usually redirecting the funds to responsible-gaming programs.