April 10, 2014
Article Co-Authored by Donald Zidik, Tax Business Senior Manager, "Taxing Fantasy Sports," Featured in AICPA's The Tax Insider
As the internet has grown enormously in the past decade, so has participation in online fantasy sports leagues. Last year, approximately 33 million people in the United States participated in these leagues, which include fantasy football, baseball, hockey, and basketball. Participants create teams using real players, and the games are played using those players’ actual performance in games.
Fantasy sports leagues and college tournament bracket contests now operate under the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, P.L. 109-347 (31 U.S.C. §§5361–5366). This act sets the criteria that must be met for an online game to not be illegal gambling or a game of chance, but instead to be considered a game of skill. These criteria are:
- All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest. The value of prizes or awards is not determined by the number of participants or the amount of any fees those participants paid;
- All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events; and
- No winning outcome may be based:
- On the score, point spread, or any performance or performances of any single real-world team or any combination of such teams; or
- Solely on any single performance of an individual athlete in any single real-world sporting or other event.