The Essential Guide to Casino Scams and Online Gambling Fraud

The house always wins–until it doesn’t. From Ocean’s 11 to 21, people seem fascinated by elaborate plots to game casinos out of winnings. But how do these sorts of schemes work in the real world, and what are the potential consequences? 

The U.S. gambling industry made over $53 billion in revenue in 2021, a 21% increase from 2020. However, casinos also lose money every year to fraudsters and people who find ways to cheat the system. 

It’s no wonder why casinos have a vested interest in reducing gambling fraud in their buildings and online. But what are the most common types of casino scams and online gambling fraud, and how do fraudsters execute them? 

Online gambling fraud 

It’s easier to game with online casinos, but unfortunately, it may be easier for players to cheat and be cheated as well. Here are a few of the most common types of online gambling fraud. 

Chargeback abuse

It’s easy to spend–and lose–more than intended when online gambling. In chargeback abuse, also known as friendly or first-party fraud, a user displeased with their losses files a chargeback through their bank, even though the transactions were legitimate. 

When chargebacks are granted, the online gambling establishment loses the original revenue as well as any additional processing fees or penalties. Unfortunately, due to the sensitive nature of online gambling and prevalence of unauthorized gambling transactions, successfully fighting back against a dispute can be an uphill battle. 

Player collusion

In this scam, a group of players use location spoofing to make it appear that they are all in different locations, when in fact they are together. The players then join a regular online casino game such as poker and use their in-person connection to sway the game’s outcome in their favor. The other users, who are playing legitimately, have no idea that they’re being cheated out of the winnings. 

The best way for gaming apps to prevent this type of collusion is to use spoof-resistant location intelligence. Rather than relying on GPS or IP address alone, spoof-resistant location technology can use a combination of device intelligence, GPS, WiFi signals, and Bluetooth signals to pinpoint location more precisely. 

CNP fraud 

CNP or “card not present” fraud happens when a criminal steals someone’s credit card information to use in transactions that don’t require a physical card, such as over the Internet or phone. When CNP fraud happens in online gambling, it’s usually a case of a fraudster using someone else’s card to gamble, which may also be considered a form of identity theft. 

CNP fraud can cause damage in a few different ways. Firstly, the victim whose card information was stolen may not be able to reclaim their funds. If the cardholder does successfully file a chargeback, then the gambling app takes the hit for the fraudulent transactions. What’s worse, if an app faces too many chargebacks within a certain time period, its payment processing provider may penalize the business with fees or even cancel their contract. 

Multiple account fraud 

In multiple account fraud, fraudsters create multiple accounts to take advantage of bonuses, earn fraudulent winnings, and defraud other players. Fraudsters may create multiple accounts on a single device, but more common is a whole collection of devices called a fraud farm. 

One type of multiple account fraud is called bonus abuse. When a fraudster commits bonus abuse, they create multiple gambling accounts or use multiple devices to take advantage of new user promotions like free credits or other perks. Online casino apps use these promotions to encourage new user signups, but when a fraudster takes advantage of them across tens of accounts, the app loses money that won’t be replaced by a new customer. 

In another example similar to player collusion, a scammer can use their device farm and location spoofing to rig poker games in their favor. The scammer may also just play against themselves across devices to stack the odds and win more payouts. This type of online casino fraud is called gnoming. 

These scams cost the app or casino site money in fraud losses and decrease the user experience value for other, more legitimate players. 

In-person casino scams

In-person casinos are some of the most heavily surveilled businesses of any industry. Because cheating can be so costly for casinos, they invest in hundreds of security cameras on their gaming floors and elsewhere so they can more easily catch scammers and settle disputes. 

Because of this, defrauding a brick-and-mortar casino is difficult, but still not impossible. Here are some of the most common types of casino fraud cases. 

Inside man schemes 

In this type of gambling fraud, players hire an inside man or woman to secretly tip the balance in their favor. 

For instance, the card game baccarat is a luck-based game wherein players bet on either the “player” or “bank” hand winning after the shoe deals a facedown card. In the baccarat false shuffle scam, a crooked dealer works with players to record the order of cards before placing them in the shoe. Normally, a dealer would shuffle the cards beforehand, but in this case, the dealer only pretends to do so. The dealer can now discretely communicate to players where to place their bets before each deal. 

If players can find a dealer willing to collude with them, both the other players and the casino stand to lose money to fraudulent winnings. 

People who work for casinos may also have access to proprietary casino software, such as the software that determines how often a digitized slot machine pays out. Using this knowledge, they may be able to rig machines or odds in their own favor. 

Concealed computer scams 

Computers have better probability and prediction skills than the average human, and that’s what makes them so valuable to a gambler. Using a concealed computer, players can more accurately predict the odds in games like roulette and make their bets accordingly. 

Concealed camera scams 

When it comes to gambling, knowing what’s on the cards can make all the difference in the world. In concealed camera schemes, a player or a hired bystander sneaks a camera into position to discreetly record the dealer’s hand. 

In some examples, the dealer may also be in on the fraud and shuffle more slowly or obviously for the camera’s benefit. The accomplice with the camera then finds a way to quietly communicate the card order to players at the table, sometimes with hand signals or even Bluetooth earpieces. 

Even one successful case of casino cheating can cost the business thousands or even hundreds of thousands of dollars, not to mention damaging the customer experience for legitimate players. That’s why it’s vital that casinos surveil all games and keep lists of suspected casino cheaters. 

The impact of gambling fraud 

The value of online casino fraud detection is self-explanatory, but there are risks to gaming companies that go beyond the obvious financial losses.  

Reputation 

Word of mouth is a powerful factor in which apps players choose to spend their money on.  However, player collusion, credit card fraud, and other risks can be enough to make the average user throw up their hands and take their business elsewhere–along with telling all of their friends and family to steer clear. 

A reputation for high fraud instances extends beyond the user base alone. Many payment processing providers consider gambling to be a high-risk industry by default. 

If an operator has excessive chargebacks due to chargeback abuse or credit card fraud, they’re likely to see their account upgraded to an even higher risk rating, resulting in increased fees and penalties. Having a poor reputation with a payment processor can also make it more difficult for a legitimate online casino to successfully win any future payment disputes.  

Legal trouble 

Casino operators themselves aren’t the only ones responsible for online casino fraud prevention. Legal regulators have a responsibility to hold operators accountable and protect consumers from businesses that fail to comply with minimum standards. If an online casino fails to stop fraudsters from scamming its users or from causing compliance violations, regulators can levy costly fines or even take further legal action.

Decreased user retention 

Everyone knows that gambling comes with risk, but if players feel like they’re fighting the odds and the fraudsters, they won’t play. When fraudsters manage to take over user accounts, compromise credit card information, and cheat by collusion, legitimate users might decide to cash out from online gambling sites and never come back. 

Strained resources 

Upon noticing suspicious activity or a problem with their account, most people’s first instinct is to reach out to customer service. While this is normally a good thing, if an online casino has a fraud problem, the incoming calls from concerned users can quickly overwhelm the customer support team, who may or may not be qualified to address fraudulent activity. As a result, users with other concerns can’t get through, and customer satisfaction ratings can plummet. 

In addition to the customer support dimension, the fraud prevention or accounting team can also face an overwhelming amount of work if the app has a chargeback fraud problem. When a business receives a fraudulent chargeback, their next course of action is to prepare a chargeback representment case to argue that the charges were legitimate. 

Building a representment case can require a significant time investment, and it isn’t scalable or easily automated. What’s more, though representment can win back the lost revenue from a phony chargeback, the business is still on the hook for administrative costs. 

The time and labor required to fight chargebacks can leave businesses between a rock and hard place—either to accept the chargeback or to dedicate untold human resources to claiming back some of their money. Even if the fraudster doesn’t win, the online casino still loses. That’s why casino fraud prevention–rather than recovery after the fact–is always the best goal. 

How to prevent gambling fraud 

Casino fraud prevention is a vital component in maintaining a safe, fair, and enjoyable gaming industry. 

In-person casinos use security cameras and even facial recognition technology to monitor all gameplay and to keep an eye out for known fraudsters. Casinos also standardize procedures like when to shuffle, when to open a new deck, how to deal, and so on. Additionally, casinos will add people they suspect of cheating to a list of banned individuals, stopping repeat offenders. 

Online casinos must do their due diligence when accepting new sign-ups. ID checks to verify age and home state, device intelligence, and spoof-resistant location intelligence are just a few ways to determine the risk level that a new player has fraudulent intentions. Online gambling fraud prevention keeps the user experience and the business’s financial viability out of harm’s way. 

Additionally, apps should keep an eye out for red flags such as spending unusually high amounts soon after creating an account, accounts that deviate sharply from their usual behavior, signs of location spoofing, and multiple accounts signing on from the same device or location.  

Players can keep themselves and their accounts safe by monitoring their credit card activity for suspicious transactions, using multi-factor authentication on their gaming apps, and reporting any suspected player collusion to the affected app or website. 

There’s always a level of risk involved in gambling, but when fraudsters stack the deck, players, and casinos take on risks they didn’t agree to. Using spoof-resistant location identity and following other fraud prevention best practices can ensure the gaming industry maintains the same level of player experience as always.