Online Gambling and Lottery Winnings – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Canadians participate in online gambling, sports betting, lotteries, poker, casino apps, and fantasy sports more than ever. With the rapid growth of online platforms like Bet365, DraftKings, PokerStars, and provincial lottery apps, many taxpayers are unsure how winnings are taxed—or whether they’re taxed at all. While most gambling and lottery winnings are not taxable in Canada, there are important exceptions, and CRA sometimes treats certain gambling activities as a business, making winnings fully taxable. Border-crossing issues arise when Canadians win money from U.S. casinos or betting apps. This guide explains when gambling winnings are taxable, when they are not, and how CRA views professional gamblers.

Legal and Regulatory Framework

The tax treatment of gambling is based on the Income Tax Act and decades of jurisprudence. In Canada, most gambling and lottery winnings are considered windfalls, not taxable income. However, if gambling activities are organized, commercial, systematic, or profit-driven, CRA may classify the activity as a business, making all winnings taxable as business income. Gambling outside Canada—especially in the U.S.—can trigger withholding taxes, requiring special forms to recover the withheld amounts. Record-keeping, proof of losses, and treaty rules can all impact tax obligations.

Key Court Decisions

In Luprypa v. Canada, professional poker winnings were ruled taxable because the player demonstrated skill, consistency, and a business-like approach. In Cohen v. Canada, casual gambling winnings were ruled non-taxable windfalls. In Leblanc v. Canada, CRA’s attempt to tax casual slot-machine winnings was rejected. In Radonjic v. Canada, the court clarified that sports betting could be taxable if organized and systematic. These cases define the line between casual gambling (tax-free) and business gambling (taxable).

Are Gambling and Lottery Winnings Taxable in Canada?

Generally NO. Most gambling winnings—including lottery jackpots, casino winnings, online betting wins, raffles, and instant games—are not taxable in Canada. You do not report casual winnings on your tax return. However, CRA will tax winnings when the gambling crosses into business activity.

When Gambling Winnings Become Taxable

CRA may treat gambling as business income if: you gamble professionally or habitually with a profit motive; you rely on gambling as a primary source of income; you use studied strategy, staking systems, or statistical models; you play poker or sports betting at a high level; you spend significant time organizing gambling activity; you treat gambling like self-employment. In these cases, CRA may classify the activity as a business and tax 100% of profits, and allow deduction of related expenses.

Online Gambling and Betting Platforms

Online gambling winnings from Canadian-based platforms (Loto-Québec, OLG, ALC, BCLC, Bet99) are usually tax-free if you are a casual gambler. However, winnings earned through organized, systematic, or skill-based play (poker tournaments, sports betting models, arbitrage betting, etc.) may be taxable. CRA audits online gamblers when: there are large unexplained deposits in bank accounts, gambling appears to be a primary income source, or platforms issue detailed transaction records.

U.S. Gambling Winnings (Important Exception)

U.S. casinos and online platforms withhold 30% tax on gambling winnings paid to Canadians. Although gambling winnings are not taxable in Canada, you must file a U.S. Form 1040-NR to recover the withheld tax. Canada’s tax treaty with the U.S. allows Canadians to reclaim withheld amounts if they can prove gambling losses or if winnings fall under exemption categories. Without filing, the IRS keeps the withheld tax permanently.

Professional Poker Players

Professional poker is generally taxable in Canada because it involves: demonstrable skill, consistent profit-making intent, financial risk management, and professional behaviour. Poker pros must report income on a business return (T2125), may deduct expenses (travel, tournament fees, coaching, staking arrangements), and may owe GST/HST in certain cases depending on the nature of services.

Fantasy Sports, DFS, and eSports Betting

Daily fantasy sports (DraftKings, FanDuel) and eSports betting winnings are generally tax-free if casual. But organized DFS players running algorithmic lineups or investing heavily in data tools may fall into the taxable business category.

Record-Keeping for Gamblers

Even if non-taxable, keep records of: wins and losses, betting statements, casino slips, online transaction histories, and cross-border receipts. These records are essential when filing U.S. tax returns or defending CRA queries regarding large deposits.

Common CRA Audit Triggers

CRA audits gamblers for: large unexplained bank deposits, significant crypto inflows from betting platforms, repeated high-value winnings, evidence of systematic betting, social media posts about gambling income, U.S. casino winnings not reconciled with IRS filings, or sudden income spikes inconsistent with tax returns.

Mackisen Strategy

At Mackisen CPA Montreal, we help online gamblers, poker players, sports bettors, and lottery winners understand their tax obligations. We determine whether your gambling is taxable or non-taxable, prepare business filings for professional gamblers, recover withheld U.S. taxes, structure cross-border gambling income correctly, prepare Form 1040-NR, respond to CRA audit inquiries, and provide full compliance support.

Real Client Experience

A Montreal poker pro was reassessed for failing to report winnings; we rebuilt records and minimized tax. A casual gambler with U.S. casino wins recovered thousands in withholding through our IRS filings. A sports bettor using algorithmic systems avoided CRA business classification after we documented recreational intent. An online player flagged for large PayPal deposits passed CRA review after our reconciliation.

Common Questions

Are lottery winnings taxable? No—if casual. Are U.S. winnings taxable? No in Canada, but the U.S. withholds tax that can be refunded. How do I know if I’m considered a professional gambler? CRA looks at intention, organization, skill, and profit motive. Are crypto betting wins taxable? Yes—crypto dispositions trigger gains or losses. Do I report gambling losses? Only if treated as a business or if filing with the IRS for refund.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures gamblers, casino winners, and online bettors stay compliant while maximizing refunds and minimizing risk. We navigate the tax rules so you can focus on enjoying your winnings safely