Kenya’s 2025 Gambling Tax Reform Promises a Revenue Surge but Hits Casual Bettors Hardest

Kenya’s latest overhaul of its gambling taxation framework under the Finance Act 2025 is being hailed by legal and fiscal experts as a potential windfall for government coffers—but the new policy also shifts the cost burden onto casual bettors, setting the stage for notable behavioural shifts across the betting landscape.

The new legislation, which came into effect in July, replaces the former 20% tax on net winnings with a 5% levy on every withdrawal made from any betting wallet. At the same time, the excise duty on deposits was reduced from 15% to 5%, reshaping the fiscal environment for both players and operators. While the government anticipates a substantial boost in tax revenue, industry observers caution that the ripple effects will be most keenly felt by everyday punters.

According to legal advisors David Sarinke of McKay Advocates and Allan Mzungu of MMS Advocates, the reform could usher in a financial boom for the state if managed effectively. “Business Daily [recently] reported government betting tax revenues are projected to nearly double after the rate cuts,” Sarinke tells iGB. “That strongly implies increased betting activity has already started to pick up following the Finance Act 2025 changes.”

Mzungu elaborates that the reform’s real innovation lies in its simplicity. “This change simplifies enforcement because tax is now collected digitally at the wallet gateway rather than at the level of individual bets,” he explains. “It broadens the tax base, since even people who deposit and later withdraw without [actively] betting are taxed, capturing far more users than before. It will surely ensure continuous cash flow to the Kenyan revenue authorities, as deposits and withdrawals occur daily.”

This new “wallet-flow” taxation model, as it is being dubbed, has been backed by data from the Parliamentary Budget Office (PBO), which forecasts that the change could double gambling-related tax income. With collection now automated and integrated into the digital wallet system, PBO analysts predict a rise in revenue from around KSh5.4 billion to KSh11.4 billion in the 2025–26 financial year.

“Under the old regime, it was the winners who paid the most – 15% to 20% of their winnings,” Mzungu explains. “Now, all bettors will pay 5% on deposits and withdrawals, regardless of whether they win or lose.”

While this reform is expected to stabilise state revenue and close long-standing loopholes, Mzungu admits that it places a heavier burden on casual bettors, who will now be taxed even without a win. Sarinke describes the transformation succinctly: “This shift has created a cash-flow based tax model rather than a bet-outcome model.”

Early indicators suggest that the new framework is already influencing player behaviour. SportPesa, Kenya’s largest betting operator, reported in August 2025 that the average wallet balance per active user had risen by KSh285 within the first month after the regulation took effect, suggesting bettors are holding funds in their wallets for longer periods.

“In terms of the behavioural impact on bettors, I’d say it is still too early to determine as the regulator has not yet released any official data,” Sarinke cautions. “But you [expect] the lower effective tax burden [on winnings] would naturally incentivise higher betting frequency and wallet liquidity.”

Mzungu breaks down the numerical impact to illustrate how the reform has redefined the economics of betting. “Before the reform, a bettor who won KSh10,000 would lose between KSh1,500 and KSh2,000 to the withholding tax on winnings. Now, under the new law, withdrawing that same KSh10,000 attracts only KSh500 in tax, which is a 70% reduction in effective tax liability.”

This wallet-centric model, designed to function in real time, streamlines enforcement and secures a constant flow of tax revenue for the government, while at the same time encouraging ongoing betting activity among experienced players. Mzungu believes that if the system is properly managed, it could have wider implications for fiscal innovation on the continent. “If properly enforced and supported by responsible-gambling frameworks, the reform could stand as a model for digital tax policy in Africa, balancing fiscal innovation with behavioral insight,” he says.

The government’s push for reform has not stopped at taxation. In July, Kenya’s gambling regulator announced a sweeping overhaul of its licensing regime, introducing significantly higher fees as part of its broader effort to strengthen oversight and modernize the country’s rapidly growing betting sector.

As Kenya’s Finance Act 2025 takes root, the country stands at a crossroads—poised for a surge in public revenue and digital efficiency, yet also facing the social and behavioural consequences of a tax system that now touches every transaction, win or lose.

By fLEXI tEAM