‘Unauthorized’ Daily Fantasy Play Poised for Scrutiny Beyond Tax

The IRS’s newly declared position that daily fantasy sports operators like FanDuel Inc. and DraftKings Inc. owe federal excise taxes on their entry fees could lead to more than audits and levies.

Gaming attorneys parsed the wording in the IRS Chief Counsel Memorandum as opening the door to potential criminal cases, by differentiating between tax rates on fees accepted in states where daily fantasy sports are sanctioned and where they’re not. The IRS on its website even describes the two rates in terms of legal versus illegal.

“It’s not a big jump to go from unauthorized to illegal,” said Kate ...