Why Winning Gamblers Are Buying Losing Lottery Tickets Online
New York, Saturday, 15 August 2026.
Successful gamblers are purchasing bulk losing lottery tickets on secondary online markets to fraudulently offset their taxable winnings, exposing significant regulatory risks amidst tighter federal tax deduction rules.
The Rise of Secondary Market Tax Strategies
As of August 2026, a growing trend among sports bettors and casino winners involves purchasing thousands of dollars worth of discarded, losing lottery tickets via online marketplaces like eBay [1]. Under current United States tax law, gambling losses can be deducted up to the total amount of reported winnings if itemized [1]. This secondary market activity highlights legal gray areas in tax write-offs and potential regulatory risks for taxpayers facing IRS audits over questionable deduction documentation [1]. Experts warn that purchasing tickets specifically to offset taxes constitutes fraud [1].
IRS Regulations and Deduction Limits
IRS Topic 419 allows filers to offset gambling winnings with gambling losses, provided the filer itemizes deductions and maintains accurate records, such as diaries, receipts, and tickets, capped at the amount of reported winnings [1]. However, the One Big Beautiful Bill Act passed in 2025 reduced the deductibility of gambling losses to 90% of winnings, starting with the 2026 tax year [1]. Consequently, a gambler with $100,000 in winnings and $100,000 in losses now incurs taxable income calculated as 10000 [1]. All gambling income, including cash winnings and non-cash prizes, must be reported on Form 1040 Schedule I [2].
Legislative Changes and Economic Impact
The new legislative change means even perfectly documented gambling losses now provide less tax relief than in previous years [1]. Congress expects to raise revenue by tightening the rules surrounding gambling loss deductions [1]. In 2025, Americans wagered roughly $166 billion on sports alone, indicating a massive scale of potential taxable events [1]. Additionally, combined monthly trading volume on prediction markets grew from under $5 billion in September 2025 to approximately $24 billion in April 2026 [1].
Enforcement Risks and Market Responses
A 2024 TIGTA audit revealed that nearly 149,000 individuals who won over $15,000 between 2018 and 2020 failed to report winnings totaling $13.2 billion [1]. eBay policy prohibits listings that promote potentially improper uses like tax write-offs, though expired tickets with collectible value may be listed if permitted under local law [1]. Federal withholding of 24% applies to winnings exceeding $5,000 for sweepstakes and lotteries, documented on Form W-2G [2]. Non-residents of the U.S. are generally taxed at a flat rate of 30% on gambling income and cannot deduct losses [2].