For sports bettors who employ arbitrage betting to capitalize on favorable line differences among legal sportsbooks, I am curious if there is leeway for using the session method to treat these bets as a single session. Here’s an example to illustrate this approach. During a game, you bet $100 on team A to win on Sportsbook A and, seconds later, bet $100 on team B to win on Sportsbook B. The bettor has bet both possible outcomes with total wagers amounting to $200. For simplicity, let's say the odds on both were +110 at the time the bets were placed. No matter the outcome the bettor will win $210, netting a profit of $10. The bets are placed within seconds on the two books with the explicit goal of capitalizing on the mismatched lines.
Arbitrage betting is unlikely to trigger a W-2G or any tax statement from a legal sportsbook like Fanduel or DraftKings so all winnings from arbitrage betting are going to be reported as other income. Unlike casino games, I know that IRS guidance has been that each sports bet is its own session and you cannot net your bets. However, this guidance is relatively old and hasn't quite caught up with the realities of legalized, mobile sports betting where arbitrage opportunities like the example above occur regularly.
Assuming the bettor keeps detailed, meticulous records (including time placed) and can provide evidence of the bets placed on both sides of an outcome, is using the session method an option? The impact on AGI is potentially huge if employing the session method vs. treating each bet as a single session. The net profit for the bettor would be unchanged but high volume arbitrage bettors could retain credits and deductions that phase out as your AGI increases (ex. the increased SALT deduction starts to phase out with AGI >$500,000).
Thanks for any guidance you can offer!
