is this a business or a hobby? if it's a hobby that withdrawal fee is a non-deductible hobby expense.
if it's a business the 1099 amount and withdrawal fee should have been reported on schedule C.
I consider this platform a parallel to Fantasy Sports which is also not gambling because the team doesn't actually exist.
from a TT article on Fantasy Sports
The IRS allows you to claim fantasy sports as a business if you can convince them it is not a hobby and that:
You engage in fantasy sports regularly, and
Treat it as a business activity with the intention of earning a profit
The IRS may consider an activity to be a business if it earns a profit at least two years out of every five.
https://turbotax.intuit.com/tax-tips/general/tax-considerations-for-fantasy-sports-fans/L75xYecdS
