Taxed to Death: How eBay’s “Losing” Lottery Tickets Expose a Bigger Problem

The phenomenon of people buying worthless lottery tickets on eBay as a way to offset their tax liabilities has raised eyebrows. At first glance, it seems like a clever strategy for those who want to avoid paying the IRS its due share. However, scratch beneath the surface and you’ll find a more complex issue at play.

According to Jeffrey Hoopes, a professor of accounting at UNC’s Kenan-Flagler Business School, this practice is nothing short of tax fraud. “There are many ways to commit tax fraud,” he says bluntly, “and this one is just an interesting example.” By exploiting a narrow provision in the tax code (IRS Topic 419), some individuals attempt to offset their gambling winnings by buying and claiming losses on worthless tickets.

The sheer scale of gambling transactions has created an environment where tax evasion becomes increasingly tempting. Americans wagered over $166 billion on sports alone last year, with another staggering amount being spent on lottery play, casino gaming, and tribal wagering.

The numbers are telling. A recent Pew Research Center analysis found that combined monthly trading volume on prediction markets like Kalshi and Polymarket rose from under $5 billion in September 2025 to over $24 billion by April 2026 – surpassing the roughly $14 billion handled per month by legal sportsbooks. Every one of these transactions produces a winner and a loser, with the IRS expecting a share of that spoils.

The Treasury Inspector General for Tax Administration’s (TIGTA) 2024 audit revealed that nearly 149,000 people who won more than $15,000 in gambling between 2018 and 2020 failed to report it, accounting for $13.2 billion in unreported winnings. This figure represents a significant loss of revenue for the IRS – an estimated $1.4 billion annually if those cases were pursued.

Hoopes’ research on eBay listings tagged “losing lottery tickets” from 2014 to 2017 shows that auctions peak in March and April (around the tax-filing deadline). This suggests three types of fraudsters: those stockpiling tickets before the deadline, those buying after the fact as a means of claiming losses, and those collecting worthless tickets for unclear reasons.

The eBay spokesperson’s statement that expired lottery tickets with collectible value can be listed on the platform “as long as the listing clearly states the item is expired” rings hollow. The company’s own policy prohibits listings promoting potentially improper uses – including tax write-offs. Yet, Hoopes notes wryly, eBay facilitates transactions between two people; it doesn’t take hold of the inventory.

This phenomenon serves as a symptom of a larger problem: the ease with which individuals can exploit loopholes in the tax code to avoid paying their fair share. As online wagering continues to grow – prediction markets, sports betting, and lotteries contributing to a staggering collective total – it’s imperative that lawmakers and regulatory bodies take a closer look at these trends. The IRS’ own compliance record suggests there’s much work to be done in ensuring those who win big are held accountable for their tax obligations.