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Online gambling in its various forms has exploded in popularity in the U.S. since the coronavirus pandemic, but lawyers and regulators warn that along with that growth has come an increase in criminal and fraudulent activity.
Currently, there are seven states with legal online gaming — Pennsylvania, New Jersey, Michigan, West Virginia, Connecticut, Delaware and Rhode Island, which launched on Tuesday (March 5). Nevada has legalized online poker only.
Meanwhile, online sports betting is available in 30 states.
“It’s a rapidly evolving business,” said Adrian King Jr., co-practice leader with the gaming group at Ballard Spahr law firm in Philadelphia.
But whether in mobile sports betting or iGaming, King stressed that the industry is seeing systems getting tested as people are trying to use online gaming to further various fraudulent schemes.
“We all recognize that as criminals go, the old saying is, 'Why do you rob banks? That’s where the money is,” King said during a panel discussion on the regulatory challenges for online casinos at the Gaming Law, Compliance and Integrity Bootcamp hosted by Seton Hall Law School in Newark, New Jersey.
King was joined by Cyrus Pitre, chief enforcement officer with the Pennsylvania Gaming Control Board (PGCB), and Sarah Brennan, senior director of compliance with BetMGM.
“I always tell people, gaming is a microcosm of the world,” Pitre said. “Anything you see going on, if you are in this industry long enough you are going to see it. And now with the explosion of iGaming, it’s on an international level.”
Pitre shared a list of some of the criminal activity that regulators have been dealing with in Pennsylvania, ranging from fraudulent deposits and withdrawals to identity theft and money laundering, as well as criminals using deceased relatives and friends’ identities to set up accounts.
Pitre said he had one woman email the PGCB’s Bureau of Licensing on Friday explaining that she had gone to get her taxes done and because she had been making so much money from a gambling website she set up on Facebook, her accountant asked if she was licensed.
“So, she was calling our office to see how she could get licensed in order to continue raking in the revenue that she was making from gambling that started within the state of Pennsylvania but exploded nationally, and she was getting people internationally to gamble on her Facebook account.”
Pitre confirmed Tuesday that the woman with the Facebook gambling account was under investigation, but he declined to release additional details.
The PGCB has also dealt with incidents of professional and college athletes wagering on their team or other teams, he said.
“So, it’s consistent,” Pitre said. “You always see people thinking they can get around the system.”
Once the fraud is identified, the control board will investigate those who are allegedly involved before referring the matter to the state’s task force, which includes the state police, Homeland Security and the U.S. Department of Justice.
Pitre said the PGCB’s involuntary exclusion list of individuals not permitted to gamble numbers well over 1,000 people.
“There are always people who are going to try and take advantage of whatever you do, so it is incumbent on you to have a very strong compliance team that can change with the times,” Pitre said.
“Invest in compliance, especially if you are in the iGaming space because the scammers out there … for the most part, a lot of them get away with a significant amount, whether it’s money laundering or setting up these fake accounts.”
Pitre warned operators attending the two-day conference that it was “incumbent upon them to deal with this issue, and not have someone like me deal with it for you and put measures in place that would cause you to operate in a different manner.”
Brennan of BetMGM agreed, saying the fraud that is occurring in the iGaming space is parallel to what is happening in the e-commerce market in general.
“There is no finish line here,” Brennan said. “There are no ultimate solutions to solving the fraud issue. It is a cat-and-mouse game for operators, regulators, payment providers, for us to continually change our fraud prevention tools to [stop] the attempts to commit fraud on our platform.”
Brennan said BetMGM continuously tests its platform to meet regulatory requirements through penetration tests, security assessments and certifications to ensure the integrity of its operations. She added that BetMGM has a team of nearly 50 employees dedicated to anti-money laundering, suspicious activity and fraud.
“So, there is a lot an operator can do, but as I said before, there is no perfect solution and no way you solve the fraud problem,” she said. “That’s never going to be a reality, but we have to be reactive, responsive and proactive in this space in order to protect legitimate customers.”
Brennan added that these efforts demonstrate to regulators that BetMGM is doing all it can to prevent fraud.
“If you are an operator out there who says, we don’t have any fraud on our platform, I’m going to take a moment of silence for you because that's not remotely true,” Brennan said. “You 100 percent have bad actors on your platform.”
Brennan said a key is on reporting fraud so regulators can investigate and “actually penalize these bad actors and begin to take them out.”
