As legal sports betting spreads, so does fraud
Any time a new market opens up, fraudsters rush in to exploit it — and this is especially true of high-risk markets like gambling.
The Supreme Court's ruling last year that struck down restrictions on the regulation of sports betting, enabling most states to encourage the activity for the first time since 1993. This not only created a market for gambling establishments, but for the security providers that must ensure that fraudsters do not run rampant.
Last year, credit card malfeasance ranked among the top three types of payment fraud reported by gaming operators involved in a study iovation, a unit of TransUnion, announced Wednesday. This represented a 155% increase over the past five years. Abuse of online casino bonuses offered to customers was the top type of fraud reported by iovation’s gaming clients last year. Between 2016 and 2018, bonus abuse reports jumped 287%.
“After the Supreme Court ruling in May 2018 that the PASPA Act was unconstitutional the online sports betting environment in the U.S. has been dynamic — eight states already actively allow sports betting or are in the process of legalizing it,” said Julie Conroy, research director at Aite Group.
She adds that fraudsters are “always attracted to dynamic environments where innovation often precedes security, and given the volume of cash involved with online gambling, that makes this industry especially attractive to organized crime rings.”
Major tech vendors like FIS and First Data have spent billions on M&A to equip themselves with the proper technology to pursue the legal sports betting market, which is estimated to reach $155.5 billion in size by 2024, according to Zion Research.
Hence, iovation is also announcing a new set of products and services aimed at streamlining customer on-boarding and making the customer experience better, as well as more secure.
Angie White, iovoation's product marketing manager, points out that the United States is a particularly “complicated landscape” where states all have differing rules on online gambling access and varying penalties. At the same time, companies like Portland, Ore.-based iovation need to stay on top of varying jurisdictions where their clients operate and differing requirements over payments they can accept, while being mindful of potential money laundering schemes.
Iovation anticipates an uptick in fraud attempts with the start of the NFL football season. Eight of the world’s 10 largest online gambling infrastructure providers rely on iovation for fraud prevention, the company says.
Iovation handles age verification, bonus abuse, credit card fraud and other risk factors.
“These [fraud] rings also thrive when there is a rapid influx of genuine user activity — it makes it much easier for their attacks to get lost in the shuffle, so events like the start of fantasy football or March Madness will certainly see a spike in attacks as well,” said Conroy.