Online Gambling and Lottery Winnings in Canada: What’s Taxable and What Isn’t — A Complete Guide

Introduction

Many Canadians earn money through online gambling platforms, sports betting apps, poker websites, fantasy sports, casino games, provincial lotteries, raffles, and private gaming pools. While gambling is more accessible than ever, it also raises confusion about taxation. Some winnings are completely tax-free, while others may be treated as business income depending on the player’s behavior and level of organization. CRA does not tax casual gamblers, but it does tax individuals who gamble as a business or rely on gambling for profit. This guide explains exactly how gambling and lottery winnings are taxed in Canada, how CRA distinguishes casual gaming from business income, what records must be kept, and when foreign winnings become taxable.

Why Gambling Creates Tax Confusion

Canada has a unique position on gambling: casual gambling is generally not taxed, but professional gambling is. CRA must determine whether a player’s activities rise to the level of a business. At the same time, cross-border gambling and online platforms introduce new issues such as withholding taxes, foreign tax credits, crypto-based gaming, and account-based play that leaves an audit trail.

Are Gambling Winnings Taxable in Canada?

Lottery winnings, casino winnings, slot machine jackpots, and online gaming winnings are generally not taxable when the individual participates casually and without a business-like structure. This applies to:
provincial lottery prizes
scratch tickets
charitable raffles
casual sports betting
casual poker games
online casino winnings
casino jackpots, slots, and table games
These winnings are considered windfalls, not income.

When Gambling Becomes Taxable Business Income

CRA taxes gambling winnings when players operate with the intention to generate profit in a structured, organized manner. Indicators of business-like gambling include:
systematic betting strategies
tracking wins/losses for profit optimization
seeking sponsorships or staking arrangements
participating in tournaments as a livelihood
using tools, bots, or statistical models
earning consistent returns
treating gambling as primary or secondary income
In these cases, gambling income is taxed as business income, and losses may be deductible if they are incurred to earn income.

Professional Poker, eSports, and Skilled Betting

Professional poker and eSports players are most likely to be taxed, especially when:
competing internationally
accepting sponsorships
earning appearance fees
streaming winnings
CRA reviews social media, sponsorship contracts, travel logs, and tournament history to determine intent.

Foreign Gambling Winnings and Withholding Tax

When Canadians win in the United States or abroad, foreign withholding taxes may apply. For example:
U.S. casinos withhold 30 percent from non-resident winners
Some countries impose additional gaming taxes
Canadians may claim a foreign tax credit on their Canadian return when the income is considered taxable. If the winnings are non-taxable in Canada (as casual gambling), the taxpayer cannot claim foreign tax credits.

Gambling Losses: Are They Deductible?

Casual gamblers cannot deduct gambling losses. Only professional gamblers earning business income may deduct:
tournament entry fees
travel
accommodations
coaching or staking fees
tools, software, and statistical systems
losses directly incurred to earn income
CRA requires strong evidence before allowing such deductions.

Crypto-Based Gambling and Play-to-Earn Gaming

Crypto casinos, blockchain-based gambling, and digital play-to-earn games add another layer of complexity. CRA treats crypto gambling winnings as:
non-taxable for casual players
taxable business income for organized or systematic players
Crypto transactions create on-chain records that CRA may examine during audits.

Provincial Lottery Rules

Winnings from:
Loto-Québec
OLG (Ontario)
BC Lotto
WCLC (Western Canada)
are tax-free. However, interest earned on lottery winnings — such as investing lump-sum jackpots — is taxable.

Gifts, Prize Money, and Contest Winnings

Prize money or cash awards received for:
content creation contests
business competitions
marketing promotions
sports performance
gaming tournaments
are taxable as income. CRA distinguishes prizes based on whether performance or contribution is required.

Recordkeeping Requirements

Players must retain:
casino or platform statements
withdrawal and deposit histories
tournament entry receipts
contracts or staking agreements
travel receipts for professional play
foreign tax withholding slips (W-2G for U.S. wins)
Proper documentation is essential for audits, especially for taxpayers claiming business-income treatment.

Common CRA Audit Triggers

large gambling deposits inconsistent with stated income
foreign casino wins with no reporting
consistent gambling profits year-over-year
sponsorship agreements or staking deals
professional tournament participation
online gaming income mixed with business or influencer income
CRA uses lifestyle audits, bank deposit analysis, and digital platform records to assess gambling activity.

When To Use the Voluntary Disclosures Program

Taxpayers who:
earned professional gambling income
received foreign wins with withheld tax
failed to report sponsorships or tournament income
misreported prize income
should use VDP before CRA initiates an audit. VDP removes penalties and reduces interest.

Mackisen Strategy

At Mackisen CPA Montreal, we determine whether gambling activity is casual or business-like, categorize winnings correctly, file foreign tax credit claims, prepare business income statements for professional gamblers, and defend CRA audits. We also guide eSports players, poker professionals, and content creators earning prize money.

Real Client Experience

A Montreal poker player classified as a business by CRA reversed a reassessment by demonstrating inconsistent income and lack of business intent. An eSports competitor facing a sponsorship-related audit resolved the issue with proper documentation. A traveler winning at U.S. casinos recovered withheld tax through foreign tax credit planning.

Common Questions

Are gambling winnings taxable? Not if casual. Are U.S. winnings taxed? Yes by the U.S. first. Can gambling losses be deducted? Only for professional gamblers. Are crypto gambling winnings taxable? Depends on activity. Do prizes count as gambling? Only if chance-based.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadians navigate gambling tax issues, determine business vs casual classification, file foreign tax credits, report prize money, and defend CRA audits with expert strategy.