Concession the Queen holds is a fallacy (7)
I believe the answer is:
sophism
'a fallacy' is the definition.
(sophism is a kind of fallacy)
'concession the queen holds is' is the wordplay.
'concession' becomes 'sop' (sop is a kind of concession).
'the queen' becomes 'hm'.
'holds' is an insertion indicator.
'hm' enclosing 'is' is 'hism'.
'sop'+'hism'='SOPHISM'
(Other definitions for sophism that I've seen before include "False argument" , "specious argument" , "faulty reasoning" .)