Are Gambling Winnings Taxable in Canada?
Many Canadians assume that gambling winnings are always tax-free.
While that is often true, Canadian tax law does not contain a blanket exemption for all gambling profits. In some circumstances, gambling activities can constitute a business, resulting in taxable income.
The Starting Point: Morden – Is Gambling Taxable
One of the leading Canadian cases on this issue is Minister of National Revenue v. Morden, decided by the Exchequer Court of Canada in 1961.
The taxpayer was a hotel owner who regularly wagered on horse races, football, baseball, hockey, card games, and other sporting events. He won substantial amounts over several years, and the CRA reassessed him on the basis that the winnings were taxable income.
The Court rejected the reassessment. However, it did not find that gambling winnings are always tax-free. Instead, the Court held that gambling gains are taxable only where they are derived from carrying on a business. Although the taxpayer was an active gambler, the Court found that his gambling was a hobby, not a vocation, calling, or business.
The Federal Court of Appeal Confirms the Principle – Gambling Can Be Taxable
The issue returned to the courts in Fournier-Giguère v. Canada, 2025 FCA 112. The case involved three successful poker players who earned millions of dollars over several years. The CRA reassessed them on the basis that their poker profits were taxable business income.
The taxpayers argued that their winnings should not be taxable. The Federal Court of Appeal rejected that argument and confirmed that there is no hard and fast rule against the taxation of gambling income. The Court also confirmed that there is no statutory rule or principle of tax law stating that gambling winnings are never taxable. Instead, the question is whether the taxpayer’s gambling activities constitute a source of income from a business.
What Do Courts Look At?
Courts consider whether the activity was carried on in a sufficiently commercial manner. Relevant factors may include:
- profit and loss history;
- training, knowledge, and expertise;
- the taxpayer’s intended course of action;
- the ability of the activity to generate profits;
- risk management;
- use of skill, systems, and analysis;
- time devoted to the activity; and
- whether the activity was conducted in a business-like manner.
No single factor is determinative. The question is whether the taxpayer has organized the activity into a commercial enterprise.
Are Sports Betting and Prediction Markets Winnings Taxable?
The principles from Morden and Fournier-Giguère may apply beyond poker. Most casual sports betting winnings are not taxable. Generally, casual betting does not constitute a business and paragraph 40(2)(f) of the Income Tax Act deems any capital gain or capital loss arising from a bet to be nil.
However, modern betting and prediction markets can involve sophisticated analysis, statistical models, bankroll management, arbitrage strategies, and significant time commitments. A taxpayer placing occasional bets is very different from a taxpayer who devotes substantial time and resources to systematic betting activities.
Canadian courts have not yet fully considered these issues in the context of modern sports betting and prediction markets. However, the recent case law suggests that the focus will be on whether the activity has become sufficiently commercial in nature.
Kirshen Tax Law Can Help
The tax treatment of gambling winnings is highly fact-specific. While many gambling winnings are non-taxable, the CRA may assess tax where it believes a taxpayer is carrying on a business rather than engaging in a recreational activity.
If you need assistance determining if your gambling constituted a business, or if you’re being audited, contact Kirshen Tax Law for a free consultation with a Toronto tax lawyer.
Jeff Kirshen BA, JD (CA), JD (US)
Tax Lawyer | Founder, Kirshen Tax Law
Disclaimer
The content on this website, including articles and blog posts, is provided for general informational purposes only. It reflects the laws and regulations as of the date of publication, which may have since changed. This content is not intended to serve as legal advice and should not be relied upon as such. Tax laws and situations can be complex and unique to each individual. The information provided may not apply to your specific circumstances. For personalized advice regarding your tax or legal matters, we recommend consulting a qualified lawyer.