Fantasy Sports Entry Fee Constitutes a Wagering Transaction

In a recent Chief Counsel Advice (CCA), the IRS concluded that the entry fee to participate in a Daily Fantasy Sports (DFS) contest constitutes an amount paid for a wagering transaction under IRC Sec. 165(d). The IRS noted that DFS transactions meet the definition of wager , as interpreted by the Tax Court and state courts, because (1) there is an uncertain event (such as the live performance of individual players), (2) winnings if the event resolves in the participant’s favor, and (3) consideration is lost if the event does not resolve in the participant’s favor. According to the IRS, DFS transactions are similar to poker and other wagers in which a player’s skill is a component of the game, but does not dictate the outcome. CCA 202042015.