Search “losing lottery tickets” on eBay and you’ll find a strange marketplace: bundles of worthless scratch-offs and instant tickets, listed for a few dollars or a few hundred. One seller offers a pound of losing Pennsylvania tickets for $10. Another advertises losing Ohio tickets with $5,200 in losses for $29.99. A third boasts $90,000 worth of losing Florida tickets for $575. Many are described as collectibles or craft supplies, but some listings openly advertise “tax write offs” and “tax deduction” as their selling point. That’s a red flag, according to an accounting professor who calls the practice “clearly tax fraud.”
Most of these listings describe themselves as “collectibles” or as material for “arts and crafts.” Some sprinkle in words like “vintage,” “rare,” or “no value.” But others go further, using phrases like “tax write offs” or “tax deduction” in their titles, apparently slipping past eBay’s filters.
“This is a way to offset your taxes, clearly tax fraud,” said 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. “There’s lots of ways to commit tax fraud. This is just an interesting one, and usually you don’t buy it on eBay, so it’s an interesting example.”
The allure is rooted in a narrow provision of the tax code. All earnings from lotteries, raffles, sports betting, horse races and casinos are fully taxable and must be reported on a return. IRS Topic 419 allows gamblers to offset the taxes on their winnings by deducting their losses, but only if they itemize deductions and maintain a meticulous diary of both winnings and losses, backed by receipts, tickets, statements or other records. The deduction is capped at the amount of winnings reported.
For someone who wins big and loses big, the stacked losing tickets could theoretically offset a hefty tax bill. But Hoopes says that’s not how the IRS sees it. “There are people who collect all sorts of random pieces of paper for whatever reason that don’t necessarily have to do with fraudulent tax documentation,” he said. “So I do not doubt that even if you couldn’t deduct gambling losses for taxes, that somebody might be willing to buy these stacks.”
eBay, for its part, insists the listings are meant for collectors. A spokesperson told Fortune: “Expired lottery tickets with collectible value may be listed on eBay as long as the listing clearly states the item is expired and is permitted for sale under local law. Listings that promote potentially improper uses of these items are not allowed and will be removed.” The company’s lottery ticket policy echoes that language, leaving little room to interpret “tax write offs” as anything other than an improper use.
But removing listings doesn’t stop sellers from finding creative loopholes. “eBay just facilitates transactions between two people. They never take hold of the inventory,” Hoopes said. “I don’t see eBay really ever being liable, but I’m not a lawyer.”
A gambling boom and a tax enforcement gap
The stakes are getting higher. Americans wagered roughly $166 billion on sports alone last year, more than the country’s film, music, book and museum industries generated combined. That figure excludes lottery play, casino gaming and tribal wagering that regulators can’t easily track.
This year brought a new channel: prediction markets. Combined monthly trading volume on Kalshi and Polymarket rose from less than $5 billion in September 2025 to about $24 billion in April 2026, according to a Pew Research Center analysis. That already tops the roughly $14 billion that legal sportsbooks handled per month on average in 2025. During the summer’s World Cup, activity in prediction markets swelled to roughly 27% of all legal U.S. sports betting volume, up from 9% at the start of the year, with Kalshi at one point seeing nearly 10 times its pace in early 2026.
Every one of those contracts produces a winner and a loser, and every winner owes the IRS money on the same terms as someone cashing a winning lottery ticket. The IRS’s compliance record suggests plenty of winners simply don’t report their gambling income in the first place, long before they consider fake tickets. A 2024 audit by the Treasury Inspector General for Tax Administration (TIGTA) found that nearly 149,000 people who won more than $15,000 gambling between 2018 and 2020 never filed a return reflecting it, accounting for $13.2 billion in unreported winnings. TIGTA estimated the IRS could collect roughly $1.4 billion more in taxes annually just by pursuing those cases.
Timing suggests fraud, not collecting
Hoopes has studied the eBay market for losing lottery tickets in detail. He keeps a stack of losing tickets about three inches thick in the school’s tax museum, bought on eBay, for research. Using historical listing data from ListingsHistory.com, he tracked auctions tagged “losing lottery tickets” from 2014 to 2017 and charted them by month.
The pattern is telling. Listings climb from 59 in January to a peak of 66 in March, hold near that level through April, then fall by more than half by June, before bottoming out around 27 to 33 a month for the rest of the year, aside from a smaller bump to 41 in September. The high months align with the approach to the April 15 filing deadline; the low months correspond to everything after it.
That timing points to three different kinds of fraudsters, Hoopes said: someone stocking up in April while filing a return, someone buying in December while closing out the year’s paperwork, or someone buying only after getting audited, in which case purchases would spread evenly through the year rather than cluster.
Whatever the timing, Hoopes compares the practice to fabricating receipts for a small business. Most people commit tax fraud simply by not reporting income, he said, but some are tempted to manufacture paper to back up invented expenses.
A new law changes the math
One thing has changed since Hoopes first wrote about this: the tax treatment of gambling losses itself. Under the One Big Beautiful Bill Act Congress passed last year, gamblers can no longer fully offset their losses against their winnings.
Starting with the 2026 tax year, only 90% of gambling losses are deductible against winnings, down from 100% before. Someone who won $100,000 and lost $100,000 in the same year could once wipe out the tax bill entirely; now the same outcome leaves $10,000 of taxable “phantom income.” That means even a perfectly documented, perfectly legitimate loss now shields less of a winner’s tax bill than it used to.
The revenue Congress expects to raise by tightening the rules on gambling loss deductions is modest: the Joint Committee on Taxation projects the recently passed 90% cap will bring in only about $1.1 billion over 10 years.