I don't see why doing it on the casino floor in Vegas is fine but doing it at home isn't.
Because it's damned hard to tax gambling winnings when they happen outside the US government's jurisdiction. A brick-and-mortar casino in Vegas will issue you a 1099 if you win enough; a virtual casino in Antigua is under no such obligation.
If that was the rationale, then why aren't US virtual casinos (which are subject to IRS requirements to collect W9s and issue 1099s) allowed?
There are tons of affiliate marketers online making money from non-US affiliate networks. By the same logic we should ban affiliate marketing in its entirety too - none of those networks issue 1099s...
1. It's online gambling is easier to ban than affiliate marketing networks.
2. Attacking traditional vices like gambling can be a political slam-dunk. Just the same as counting the number of convictions under your belt to appeal to 'law and order' types of voters.
3. US casinos probably make some amount of political contributions. Banning foreign gambling sites cuts competition.
How does that work when you "win" but have actually lost? If I go into a casino, spend 20k, then win back 15k, have I actually lost more than the difference 5k because that 15k is taxed?
For amateurs, the IRS has a concept of gambling "sessions". You net your win/loss within a session. You report the total of all winning sessions as income, and itemize your losing sessions (which can't exceed wins).
States and cities have varying laws. Basically most states with casinos allow you to do the same as on federal returns. Those without require you to report all wins as income and not deduct losses, effectively making it impossible to gamble with any regularity (since you could easily owe taxes on $200k of income, of which you only saw $10k... or worse, -$10k).
Pros can simply net their wins/losses (while maintaining a record-keeping notebook). To qualify as a pro you have to derive almost all income from gambling.
Gamblers get worried when people want to close tax loopholes (such as itemized deductions for certain things). They can come scarily close to losing their way of making a living.
I don't know how the casino handle it in practice, but theoretically, if you can itemize, you'll get it back at the end of the year (up to the extend of your winnings).
Because it's damned hard to tax gambling winnings when they happen outside the US government's jurisdiction. A brick-and-mortar casino in Vegas will issue you a 1099 if you win enough; a virtual casino in Antigua is under no such obligation.