While casino operators and players cheer the newly raised IRS threshold for reporting slot jackpots, implementing that simple-sounding change to machines nationwide might take months.
Daron Dorsey, president and CEO of the Association of Gaming Equipment Manufacturers, said that’s because of the complex process of modifying the inner workings of thousands of machines designed by dozens of suppliers, while adhering to regulatory procedures spelled out by multiple state and tribal jurisdictions.
“Operators, regulators, and suppliers all play a part in this … but the solution will be different in Jurisdiction X vs. Jurisdiction Y vs. Jurisdiction Z,” Dorsey told CDC Gaming. He said the entire first-time process “will probably take some weeks and months.”
The federal tax law approved last year increased the slot-jackpot-reporting minimum from $1,200, where it had been since 1977, to $2,000; the change took effect Jan. 1, 2026. In mid-December, the Internal Revenue Service released a draft of updated rules covering the issuing of W-2G tax forms and tax withholding for slot jackpots.
Dorsey said suppliers will determine the best method for instructing each of their machines to lock up at the new jackpot level of $2,000, briefly making the machine unplayable while tax paperwork is completed and the jackpot is paid by hand. The update command could differ from one supplier to another and even within different families of machines from one supplier.
Suppliers then will have to schedule implementation with each casino. Operators typically have multiple slot suppliers and will want to spread out their work to minimize down time.
Regulators also have a vital role in the changeover, Dorsey said. Each jurisdiction sets its own rules for software updates or other changes to slot machines. In addition, even the same game title might have slight software differences because of individual technical requirements among jurisdictions.
The process of installing the update in each machine “is maybe more of a headache” than developing the update itself, Dorsey said. “It’s not something you can download like a new operating system for your phone. There are regulatory procedures in every jurisdiction about updating game software. You might have to open up every single one of those cabinets.”
Dorsey said one supplier’s fix won’t necessarily work for another’s games. “Every manufacturer/supplier has a technology stack that is built on decades of software and base versions and game versions,” he explained. When updating the W-2G threshold, suppliers also must ensure the change is compatible with all game versions and doesn’t create unintended consequences or qualify as a “new” game version that would require costly testing by an independent lab or re-authorization by regulators.
Pennsylvania, which has more than 24,000 slot machines in 17 casinos, is one of several states specifying a $1,200 threshold for issuing a W-2G, but it has already addressed part of the update issue. The state’s Gaming Control Board told operators in a Dec. 30 letter that it considers the $1,200 reference “as being intended to coincide with the IRS W-2G issuance threshold,” so operators can adopt the $2,000 trigger point this year.
Dorsey said that instead of waiting for software updates, some operators might opt to change their internal procedures and have staff simply restart a machine that locks up for a jackpot between $1,200 and $2,000.
He encouraged cooperation among suppliers, operators, and regulators to enable the reporting-threshold update to be implemented as smoothly and quickly as possible. He noted that the three groups worked together during the COVID pandemic to enable more drastic measures, such as temporary casino closings and machine shutdowns. “You couldn’t comply with all of the rules and requirements on timelines and notifications,” he said of the pandemic response. “Everybody was working in a collaborative environment to try to get through.”
He also said this year’s experience with the slot-threshold change should make the process easier in later years as the threshold is adjusted for inflation.
“We all want the same thing, and we’re all trying to work through it together,” Dorsey said. “We have other issues that are much bigger headaches – unlicensed, illegal operations and those kinds of environments – for us to work through.”
