Timmy Turner, who’s tired of being the "guinea pig" of spats between the Fairies, Pixies and Anti-Fairies, wishes for a competition to see who's the best magical creature. Jorgen won't let any other fairy compete because he’s the strongest, but after he wins the first five medals, Anti-Cosmo and H.P. knock out Jorgen. Timmy becomes the fairies' trainer and makes a bet: if Anti-Cosmo wins, Timmy will be his godchild, if H.P. wins, Timmy will work for him forever, and if Timmy wins he'll make HP and Anti-Cosmo do something really bad.
Tired of the Fairies, Anti-Fairies, and Pixies fighting over who is the best, Timmy starts the Fairy World games. He wishes Scott Hamilton, the famous skater, as commentator of the games and makes him believe that it all was just a dream. Jorgen turns out to be the only fairy competing, since he believes that the other fairies can't do it. Cosmo tries to prove that he’s good at playing tennis, but the racket makes his head fall off his body.
Jorgen proves to be completely perfect at every game, defeating and humiliating the Anti-Fairies and the Pixies. Despite their begging, Jorgen still refuses to let the other fairies compete. After Jorgen wins five medals for the Fairies, the Anti-Fairies and the Pixies cheat by tricking Jorgen into knocking himself out, hitting him with a pan hidden inside of a camera. Timmy says the Fairies still can win even without Jorgen so HP and Anti-Cosmo challenge him for a bet. If the Fairies win, HP and Anti-Cosmo will do whatever Timmy wants. If the Anti-Fairies win, Timmy will become Anti-Cosmo's evil godchild. If the Pixies win, Timmy will become an office boy at Pixies. Inc. Timmy accepts the bet, even though his Godparents disagree. The Fairies try to win, but the Pixies and Anti-Fairies keep cheating to win. After 28 more events the Anti-Fairies and Pixies are tied 14-14 and the fairies are still stuck with 5 points with only 10 events left.
So Timmy decides to be the Fairies' coach, choosing the best fairy for each event, winning all of them, and making all teams tied for first place when there's only one event left, the 1,000,000 Year Dash, where each contender would travel across 1,000,000 years of History and then return to the finish line. Jorgen wakes up but Timmy knocks him out again, so he chooses Cosmo to compete against HP and Anti-Cosmo.
After passing through the prehistoric age and Camelot (that was actually a camel lot organized by King Arthur) Cosmo's head drops off his body again. When the contenders arrive to the Revolutionary War between the U.S. and England, George Washington uses Cosmo's head as a cannonball, shooting him through the time portal and across the finish line moments before HP and Anti-Cosmo. Cosmo wins the final event, and The Fairies win the Fairy World Games. While celebrating the victory, Timmy reveals that he knew that Anti-Cosmo and HP would sabotage each other and forget about Cosmo.
Timmy doesn't make the Anti-Fairies and Pixies do anything, showing them that cheaters never win. But he hits them with the pan hidden inside of the camera. Then Timmy, Cosmo, Wanda and Poof take Scott Hamilton back to his home. In a little live-action scene, Scott wakes up from his apparent dream and notes the moral of the whole episode to a teddy bear which was "Cheaters never win and winners never cheat". Upon saying "cheater", Juandissimo and Cupid hear "cheetah", and make a cheetah appear on Scott's bed. The cheetah then attacks Scott while Timmy, Wanda, Cosmo and Poof appear in his backyard. Then Cosmo loses his head again as the episode ends.