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For a big win taxes would be a problem. Harrah's (I'm not sure when they are changing their name to Caesar's) is going to ask for a tax number for the winner before they cut you a check, and that person will be responsible for the taxes. So if you give away some portion of your winnings pre-tax, you end up paying the taxes for the other people.

I also think that an automatic 20% is going to be withheld from all payouts (over a certain amount) for taxes this year because of a stupid tax law change effective March 2008. But I'm not sure on this....

I think you can split it to more than one tax number if you tell the casino before receiving the cash -- that's one reason Jamie Gold left his money unclaimed until he figured out who got what. But they may have changed the rule, or may be unwilling to record more than 2 people, or something like that. I wouldn't count on this.

I don't know how you set up an ironclad agreement on this. Do all of you trust each other? Would you be OK with something that says you'll split up the 80% payout (80% after tax of the 20% pool, that is) and then each one makes good on the net after-tax amount (plus or minus) after the winner's taxes are filed?

You also have to decide if you are going to report any small payouts on your taxes (payouts that aren't reported to the IRS by Harrah's). Or if you will net your expenses against these payouts to show an actual taxable gambling winnings amount on your return.