Sportsbook Fraud

Gaming the System? How Fraud Impacts Both Customers and Online Sportsbooks

Online sports betting has exploded across the United States since the Supreme Court’s 2018 decision paved the way for state-by-state legalization. With that growth, there has come a surge in fraud that targets both betters and sportsbook operators.

A recently published article in Barron’s reports Americans wager roughly $150 billion annually on sports, and with the 2025 football season set to kick off, online criminals are looking to cash in. Legal, well-regulated markets provide monitoring of fraud threats and better recourse, but the presence of unlicensed operators and cyber criminals keep fraud and manipulation risks alive. The most persistent threat to the customer is account takeover, where criminals reuse breached passwords or phish for login credentials, then drain wallets, convert bonus credits to withdrawable funds, or place bets that leave victims footing the bill.

Online sports betters also face classic, targeted scams dressed up for the mobile era. Phishing texts that mimic sportsbooks, fake “betting tips” groups that pressure victims to deposit to offshore books, and counterfeit apps that steal credentials are all common techniques used by fraudsters. Government agencies warn that text-initiated scams and broader cyber-enabled fraud continue to hit record losses.

An additional risk for betters is a surge of illegal gambling sites, where consumer protections, age checks, and anti-fraud controls are weakest. The American Gaming Association’s latest analysis estimates that illegal and unregulated gambling constitutes a sizable share of the U.S. market, channeling tens of billions in revenue offshore and outside consumer protections. If money moves to unlicensed offshore sites, fraud attempts become more likely, recovery options are limited and data may be at higher risk.

The fraud risks are equally as high for the companies licensed to manage regulated online sports betting platforms. First-party fraud, where customers dispute legitimate deposits or withdrawals were estimated to be as high as $2.8 billion in related losses for 2024, as reported by identity verification platform Socure.

Another challenge for sportsbooks is jurisdictional evasion. U.S. sportsbooks must verify a bettor’s physical location because rules vary by state and even by county. Fraudsters routinely try to spoof location with VPNs, proxies, or tampered GPS signals to bet where it’s otherwise illegal, raising compliance and integrity risks for operators and exposing bettors to account closures or forfeited winnings. Regulators and vendors have responded with stricter geolocation checks, but proxy betting and location spoofing remain common.

A new threat to sports books is “muling,” where gambling syndicates purchase real IDs to create numerous betting and bank accounts to be used by individuals or groups that have been banned from legal sports books. Once the syndicates are finished with the seller’s accounts, the data can be used to potentially open loans or credit cards in the seller’s name, or sold on the black market. Muling illustrates how identity abuse can create long-term problems for both financial rails and sportsbooks alike.

While sports books continue to fight fraud through well-regulated and legitimate means, practical protections for bettors start with legitimacy. Those wanting to place an online bet should remember that who you bet with matters as much as how you bet. Only use licensed sportsbooks in your state, which can be verified by checking your state gaming regulator’s list. Betters should never share accounts, and always enable multi-factor authentication while creating unique, strong passwords for betting and banking apps as to limit account take over fallout. They should also avoid third-party “deposit helpers” and be skeptical of “guaranteed picks” or promotions that require large upfront deposits.

If you suspect fraud, document transactions and report to your state regulator, your bank, and federal channels like the FBI’s Internet Crime Complaint Center. For scam texts or deceptive advertising, along with the above mentioned agencies, the FTC’s reporting portal can help authorities spot patterns. Overall, sticking to regulated operators, locking down your security, and reporting suspicious activity are the best bets to prevent your favorite pastime from becoming a fraudster’s payday.