Are gamblers purchasing losing lottery tickets committing tax fraud?

The concept is straightforward: if you've gambled and lost more than you've won, you can deduct those losses from the taxes you owe on your winnings. But if you're ahead, the government will want its share. Many people have figured out a way around this by misrepresenting their gambling outcomes, using other people's tickets—possibly hundreds—as their own. The Internal Revenue Service has strict guidelines about that. Some platform vendors label these as collectibles to obscure the buyer's real intention. Jeffrey Hoopes, an accounting professor at the University of North Carolina's Kenan-Flagler Business School and research director of the UNC Tax Center, has described this practice as clearly tax fraud in a comment for Fortune.com, which conducted the original reporting. Hoopes does admit, however, that labeling them as collectibles isn't entirely wrong, as there are people who genuinely purchase these tickets to collect them.

Naturally, this practice—assuming fraud is involved—has been complicated by the passage of the One Big Beautiful Bill Act. This legislation allows gamblers to offset only up to 90% of their losses, leaving 10% taxable regardless of the number of receipts they provide. Hoopes went further by tracking eBay listings for losing lottery tickets from 2014 to 2017. He discovered listings peaked around April when tax returns were due, and then quickly fell after the deadline. In 2024, the Treasury Inspector General for Tax Administration uncovered an even more shocking issue: at least 149,000 individuals won $15,000 or more but never reported it—an estimated $13.2 billion in unreported winnings.