* Use a different word than "race" for beings with entirely different origins like elves, dwarves, orcs, etc.
Species is the correct word, at least as long as two different races can't produce fertile offspring.
They often can, though, in fantasy. See: half orcs, half elves, etc.
But that doesn't make them biological races because fantasy's rules for biology aren't the same. There is much more of a spiritual angle.
I mean, in what biological context can a demon could produce a viable offspring with a human?
The source is ancient myths and legends, in which humans could readily breed with animals, gods, demons, monsters, objects - you name it.
So there isn't an actual reason for why fantasy must follow the rules of human biology, aside from a lack of imagination.
In fact, the various "races" in fantasy aren't even related to one another. Tolkien's dwarves, elves, and humans were acts of separate creation. They have nothing to do with each other, evolution wise.
Same is the case for Dungeons and Dragons. So even the word "species" is not quite right because it implies a biological origin. The "races" in fantasy are actually more like separate orders of being - like angels vs. humans. Their creation stories hard support this, but for whatever reason, writers don't care.