Chargeback Prevention

A Guide to Preventing Online Gambling Fraud

What Rights Do Merchants Have In Credit Card Chargebacks_Blog Image

Anyone who engages in online gambling understands that there’s a significant element of risk involved. Playing games of chance and letting the odds determine your fate always carries some danger that you’ll end up losing, but the rules you’re playing by are supposed to be fair.

Fraudsters upend this delicate balance by forcing themselves into online gambling scenarios where they can, cheat, hack, and steal to take advantage of both the house and other players. How is fraud impacting the world of online gambling, and what can merchants to do get this problem under control?

New call-to-action

Online credit card fraud is a huge problem for every merchant in ecommerce, from the biggest and most family-friendly retailers to small, niche-oriented internet gaming sites. The total global cost of cybercrime may exceed $6 trillion per year by 2021, and a significant portion of that financial burden falls directly on the merchants who sell goods and services over the internet. The costs of ecommerce fraud come back to bite merchants in multiple different ways.

The most direct cost is the revenue lost to online fraud, but it doesn’t stop there. Merchants also suffer damage to their customer relationships, as victims wonder, fairly or not, why they establishments they trusted didn’t do more to protect their money. Merchants who process fraudulent transactions also get hit with added fees and higher processing rates by their acquirers and payment processors, and all of this takes place before chargebacks rear their ugly heads.

How Does Fraud Affect Online Gambling?

Online gambling is both increasingly popular and highly restricted. It’s one of the fastest-growing markets in ecommerce, with a CAGR of just under 12%, but most states don’t allow online gambling. The legal and moral peripheries that gambling inhabits in the eyes of many has long made it appealing to fraudsters, who used casinos for money-laundering scams.

Fraudsters are opportunists by nature and will always gravitate toward vulnerabilities and gray areas.

The average person may find it predicable to hear that a gambling site was targeted for fraud, but this is unfair to the merchant who may have been trying their hardest to run a safe and reputable site. Fraud undermines confidence in an industry that already has challenges with public perception and regulation.

It’s important to note as well the specific negative consequences of dealing with a successful fraud attack. Most forms of online fraud involve the use of a compromised credit card belonging to an innocent third party. When the cardholder finds out they’ve been victimized by fraud, they can demand a chargeback to get their unauthorized transaction reversed.

The credit card networks monitor chargeback activity, and may require merchants with “excessive” fraud and chargeback rates to take concrete steps to bring their numbers down. Merchants who are unable to do so may have their accounts terminated and be forced to contract with “high risk” payment processors. As online gambling merchants are often categorized “high risk” by default, a chargeback problem can quickly limit their options for affordably and reliably accepting credit card payments.

What are the Most Widely Seen Types of Online Gambling Fraud?

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyIt’s always good to be wary of fraud that takes unexpected forms—fraudsters know the extent of the resources deployed to stop them and will often try novel approaches to get around these defenses. Certain fraud schemes, however, are seen time and time again.

  1. Multiple Accounts/Account Takeover Fraud

    One of the best ways to give yourself an advantage in online gambling is to control multiple user accounts. Fraudsters may create multiple accounts for this purpose, but it works even better when they can take over legitimate customer accounts by stealing or guessing their passwords. Once the fraudster controls a wide array of accounts, various scams are at their disposal:

    • Chip Dumping

      A form of fraud where one player colludes with another by deliberately losing to them.

    • Gnoming

      The practice of owning multiple accounts and placing multiple bets with the same gambling site. Gnoming is often used to take advantage of bonuses and promotional offers, enabling a single user to accrue benefits many times over.
  2. Credit Card Fraud

    It is extremely common to see fraudsters using stolen credit cards at gambling sites. If they can get the card to work, they can quickly and easily cash out, allowing them to launder cash from the reams of stolen payment credentials that are readily available on the dark web.

  3. Chargeback Fraud

    Also known as “friendly fraud,” this is when a legitimate customer files a chargeback under false pretenses to get their money back. It’s often seen in online gambling, where someone who just lost a lot of money can simply call up their bank, claim that their card was used without their permission, and get reimbursed for their gambling losses.

How Can Merchants Prevent Online Gambling Fraud?

The best way to protect against online fraud is to know why your customers are and what accounts they’re accessing. This is easier said than done when fraudsters are working hard to circumvent your defenses, but many merchants still leave tested and proven methods on the table.

Identity verification services that look at a user’s IP address, geolocation, email address, device fingerprints, and other identifying data, along with strong passwords and two-factor authentication requirements, can ensure that you know who’s really using your site.

These services can be bolstered with risk-based scoring technologies that put additional scrutiny and verification requirements on suspicious accounts, without adding friction to the experiences of known and trusted users.


Ultimately, there’s no getting around the fact that online gambling sites are especially attractive to fraudsters. That means that online gambling merchants often have no choice but to uphold higher than average standards of security and identity verification in order to reach the same levels of protection that the typical merchant enjoys.

When online fraud comes back to haunt you in the form of chargebacks, it’s important to choose your response carefully. While you can’t fight a true fraud chargeback, a vigorous defense is the best remedy against “friendly” chargeback fraud. Don’t leave the outcome of these cases up to a twist of fate—with compelling evidence, a strong cover letter, and the facts on your side, you can fight and beat these chargebacks.

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions or requests for advice to:

New call-to-action