Yes, in accordance with IRS guidance DraftKings reports the value of Reignmakers cash and Digital Player Card prizes on Form 1099-MISC without consideration for the purchase value of Digital Player Cards used to enter the Reignmakers contests.
Digital Player Cards are considered digital assets by the IRS and are treated as property for federal tax purposes. The IRS doesn't currently require DraftKings to report the Digital Player Card purchase and sale data from the DraftKings Marketplace but this activity should be taken into consideration when filing your taxes. Depending on your individual circumstances, you may be able to offset the Reignmaker income with certain losses or expenses.
Please work with your tax advisor to determine the best treatment for these digital assets considering your personal circumstances.
Below are some helpful IRS publications to assist with this analysis:
- IRS Digital Assets: See Definition of Digital Assets and Tax Consequences
- IRS Tax Tip 2020-108, Earning Side Income: Is it a hobby or a business?
- IRS News Release IR-2023-12: See How to report digital asset income
To understand how a Digital Player Card sale will affect you during tax preparation, DraftKings suggests that you consult with a tax professional. This material has been prepared for informational purposes only and should not be relied on for tax or accounting advice.