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Iowa lawmakers have signed off on a far-reaching gambling bill that tightens enforcement rules and changes how certain winnings are taxed. Senate File 2289 cleared the Iowa Senate on Monday (February 23), moving forward with a package aimed squarely at how betting is regulated across the state.
The proposal surrounds the authority of the Iowa Racing and Gaming Commission, the agency that oversees casinos, sports betting and other legal wagering. Lawmakers rewrote parts of state law to make clear the commission can take whatever action it believes is reasonable and necessary to police gambling activity and enforce its own rules.
Iowa gambling enforcement powers bill and recent FanDuel fine
Under the updated language, regulators can issue cease and desist orders or head to court to seek injunctions against anyone offering gambling without proper approval. That applies to pari-mutuel wagering, advance deposit wagering, internet fantasy sports contests, games of chance, sports wagering and illegal sweepstakes operating in Iowa without a license.
Penalties for unlawful betting also grow steeper. Anyone convicted of certain violations faces a class “D” felony. A single qualifying conviction brings a lifetime ban from sports wagering, advance deposit sports wagering, excursion gambling boats and gambling structures regulated by the commission. Two convictions for unlawful betting automatically trigger the same lifetime prohibition.
The bill also rewrites parts of Iowa’s tax code dealing with gambling winnings. State income tax must now be withheld on winnings above $600 from gambling activities authorized under specified chapters of Iowa law. For other types of gambling, including those authorized under chapter 99D, withholding kicks in on winnings over $1,000 when the payout meets the federal information return threshold in place as of July 4, 2025. Slot machine winnings above $1,200 are subject to withholding if they meet that same federal reporting requirement. In the case of sports wagering, state tax must be withheld whenever federal income tax withholding is required on the winnings.
Lawmakers labeled the withholding changes an immediate priority, meaning that portion of the measure takes effect as soon as it is enacted. Speaking on the Senate floor, Sen. Dan Dawson said: “This is a good bill, as I’ve stated before, not only do we have a responsibility in the legislature to ensure that our regulators are regulating the gambling industry, we also have a responsibility to protect those licensees from illegal operators.
“Probably the most important provision is to ensure that we allow our regulator to attack, legally, these out-of-state actors who are providing an illegal service here in the state. There has to be a value to holding a gambling license in the state of Iowa.”
The vote comes as the commission has shown a willingness to discipline major operators. Recently, FanDuel was hit with a $125,000 fine by Iowa regulators after an investigation found the company had accepted prohibited wagers and failed to prevent certain unauthorized bets from being placed. The penalty, reported by ReadWrite, drew attention to the state’s tougher stance on compliance and signaled that even national brands are not immune from enforcement.
Featured image: Screenshot from Iowa Legislature
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