Compression of biosignals is an important means of conserving power in wireless body area networks and ambulatory monitoring systems. In contrast to lossless compression techniques, lossy compression algorithms can achieve higher compression ratios and hence, higher power savings, at the expense of some degradation of the reconstructed signal. In this paper, a variant of the lossy JPEG2000 algorithm is applied to Electroencephalogram (EEG) data from the Freiburg epilepsy database. By varying compression parameters, a range of reconstructions of varying signal fidelity is produced. Although lossy compression has been applied to EEG data in previous studies, it is unclear what level of signal degradation, if any, would be acceptable to a clinician before diagnostically significant information is lost. In this paper, the reconstructed EEG signals are applied to REACT, a state-of-the-art seizure detection algorithm, in order to determine the effect of lossy compression on its seizure detection ability. By using REACT in place of a clinician, many hundreds of hours of reconstructed EEG data are efficiently analysed, thereby allowing an analysis of the amount of EEG signal distortion that can be tolerated. The corresponding compression ratios that can be achieved are also presented.