In July 2025, the Kenyan government introduced a new taxation policy under the Finance Act 2025 that has significantly restructured the iGaming sector’s tax framework. This policy imposes a 5% tax on every withdrawal made from betting wallets, replacing the previous 20% levy on net winnings. Additionally, a 5% excise duty on deposits has been implemented, which reduces the previous duty from 15%. This initiative is seen as a strategic move to enhance government revenues while also streamlining the tax collection process.
Legal experts, including David Sarinke of McKay Advocates and Allan Mzungu of MMS Advocates, view this policy shift as a potential financial boon for the government. They believe that by lowering the tax rates, the government can stimulate betting activities, thereby expanding the tax base and increasing overall revenues.
The new taxation policy, however, places a greater financial burden on casual bettors, as they are now taxed on both deposits and withdrawals, regardless of their betting outcomes. This change introduces new behavioral and ethical challenges that gambling regulators will need to monitor closely. According to a recent report by Business Daily, government betting tax revenues are expected to nearly double due to these policy changes, indicating an increase in betting activity since the Finance Act 2025 came into effect.
Mzungu elaborates that the new tax system simplifies enforcement by collecting taxes digitally at the wallet gateway level, rather than on individual bets. This method broadens the tax base by taxing users who deposit and later withdraw funds without necessarily betting. “This approach ensures a steady cash flow to the Kenyan revenue authorities, as deposits and withdrawals occur on a daily basis,” he explains.
The Parliamentary Budget Office (PBO) supports this optimism, projecting that the “wallet-flow” taxation system could double gambling tax revenue. This automated and secure collection system is expected to boost revenues from approximately KSh5.4 billion to KSh11.4 billion in the 2025-26 financial year.
Under the previous tax regime, winners bore the brunt of the tax burden, paying between 15% and 20% of their winnings. Now, with the introduction of the new policy, all bettors incur a 5% tax on both deposits and withdrawals, irrespective of their wins or losses. Mzungu notes that this shift towards a cash-flow based tax model is designed to stabilize revenue streams for the government while closing existing loopholes. In contrast, casual bettors may end up paying more, as they are taxed without any winning returns.
The introduction of the Finance Act 2025 has already begun to influence betting behavior. SportPesa, Kenya’s largest iGaming operator, reported in an August 2025 update that there was an increase in the average wallet balance per active user by KSh285 within the first month of the new regulation. This suggests that bettors are holding onto their funds for longer durations, which could indicate a shift in betting habits.
Sarinke points out that it is still too early to draw definitive conclusions about the behavioral impact of the new tax system, as the regulator has yet to release official data. However, the lower effective tax burden on winnings is expected to encourage more frequent betting and increased liquidity in bettor wallets.
Mzungu provides further insight into the implications of the new tax system: Prior to the reform, a bettor who won KSh10,000 would lose between KSh1,500 and KSh2,000 to withholding tax. Under the new law, withdrawing the same KSh10,000 results in a tax of just KSh500, representing a 70% reduction in tax liability. This significant decrease in effective taxation is likely to incentivize higher betting activity.
The Finance Act 2025 has transformed Kenya’s betting framework into a real-time, wallet-based tax network. This reform simplifies enforcement for the government, increases revenues, and encourages continuous betting, particularly among experienced bettors. Mzungu expresses cautious optimism about the future, suggesting that if the reform is properly enforced and supported by responsible-gambling frameworks, it could set a precedent for digital tax policy in Africa, balancing fiscal innovation with behavioral insights.
In addition to the tax policy changes, the Kenyan gambling regulator announced in July a revision of its licensing process, which includes a substantial increase in licensing fees. This move is likely aimed at further regulating the industry and ensuring that operators comply with the new taxation system, thereby contributing to the government’s fiscal goals.
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