Gamblers Purchase Losing Lottery Tickets on eBay for Tax Offsets

Gamblers are reportedly purchasing losing lottery tickets on eBay to offset taxes on their winnings, a practice described as tax fraud by a University of North Carolina professor.

What Happened

Individuals are reportedly buying losing lottery tickets on eBay, with some listings explicitly mentioning “tax write offs” or “tax deduction” in their titles, despite eBay’s policies against promoting improper uses. Jeffrey Hoopes, a professor of accounting at the University of North Carolina’s Kenan-Flagler Business School and research director of the UNC Tax Center, characterized this activity as a method of tax fraud, noting its unique execution through online marketplaces (Fortune).

eBay’s policy permits the sale of expired lottery tickets with collectible value, provided the listing clearly states the item is expired and adheres to local law. Listings that promote potentially improper uses, such as for tax deductions, are reportedly removed by the platform, according to an eBay spokesperson (Fortune).

Key Details

• Losing lottery tickets are listed on eBay for purchase, with some advertisements explicitly mentioning “tax write offs” or “tax deduction” (Fortune).
• Jeffrey Hoopes, a professor of accounting at UNC, stated that buying losing tickets for tax offsets constitutes tax fraud (Fortune).
• An eBay spokesperson confirmed that listings promoting improper uses, such as tax deductions, are not allowed and are removed (Fortune).
• All earnings from lotteries, raffles, sports betting, horse races, and casinos are fully taxable and must be reported on a return (Fortune).
• IRS Topic 419 allows individuals to offset taxes from gambling winnings with losses, but deductions are capped at reported winnings and require accurate records (Fortune).
• Starting with the 2026 tax year, only 90% of gambling losses are deductible against winnings, a reduction from the previous 100% (Fortune).
• A 2024 audit by the Treasury Inspector General for Tax Administration (TIGTA) found that nearly 149,000 individuals with over $15,000 in gambling winnings between 2018 and 2020 did not report them, totaling $13.2 billion in unreported income (Fortune).

Why It Matters

This practice highlights a loophole in tax compliance related to gambling winnings and losses, influencing the regulated gambling market and tax revenue collection. The reported tactic potentially enables individuals to reduce their taxable income from gambling, which is a fully taxable revenue stream. The recent legislative change, reducing the deductibility of gambling losses to 90% from 100% starting in the 2026 tax year, indicates an attempt by Congress to tighten regulations and generate additional tax revenue. The Joint Committee on Taxation projects this 90% cap will raise approximately $1.1 billion over 10 years (Fortune).

The gambling industry in the U.S. has experienced significant growth, with Americans wagering approximately $166 billion on sports alone last year, excluding other forms of gambling such as lotteries, casino gaming, and tribal wagering. The emergence of prediction markets further expands this landscape, with combined monthly trading volume on platforms like Kalshi and Polymarket increasing from less than $5 billion in September 2025 to approximately $24 billion in April 2026, according to a Pew Research Center analysis. Every winning wager across these platforms is subject to tax, underscoring the importance of accurate reporting and legitimate deduction practices (Fortune).

What’s Next

The One Big Beautiful Bill Act, passed last year, will alter the tax treatment of gambling losses, with a 90% deductibility cap taking effect for the 2026 tax year. This means that even with legitimate and fully documented losses, a portion of winnings will remain taxable. This legislative change aims to increase tax revenue, with a projected $1.1 billion over 10 years (Fortune).

Originally reported by Fortune·Published 15 Aug 2026, 09:00