Will the US Match UK’s Play On Real-Money Gaming Fraud Protections?

Will the US Match UK’s Play On Real-Money Gaming Fraud Protections?

Will the US Match UK’s Play On Real-Money Gaming Fraud Protections?

1000 648 David Hoppe

The allure of virtual skill-based gaming platforms, with their promise of tangible rewards for player speed, knowledge, and coordination, attracts players worldwide. However, beneath the seemingly innocuous surface of these games lies a pervasive issue: the exploitation of unsuspecting gamers through fraud and deception. The increasing prevalence of in-game purchases and virtual currencies has inadvertently fueled a thriving ecosystem of fraud within the gaming industry.

In the United States, the magnitude of this problem is staggering. Based on data from the Federal Trade Commission, Americans lost approximately $8.8 billion to scams in 2022, marking a 30% increase from the previous year. Nationwide, imposter scams are the most common type of fraud. The increase in audience engagement has highlighted the risks of online gaming because many online games involve in-game currency, in-game purchases, and real-world fiat and virtual currency (stored in wallets). Consequently, online gamers are an easy target for fraudsters.

One key challenge in combating gaming fraud is the intricate nature of transactions involving virtual goods. These transactions occupy a legal gray area, distinct from traditional scams, often leaving victims without legal recourse. Since the pandemic’s onset, the gaming industry surge has only made gamers more appealing targets for unscrupulous individuals.

UK Opens the Regulatory Action

Recognizing the gravity of the situation, some governments have taken proactive steps. In 2023, the UK implemented the Financial Services and Markets Act (FSMA). This progressive legislation extends protections against bank transfer scams to include victims of gaming fraud. However, in the US, the situation remains dire. Without similar protective measures, American gamers remain vulnerable to increasingly sophisticated fraudulent schemes.

While legislative action undoubtedly will form part of the solution, the responsibility also lies with gaming companies to prioritize fraud prevention. Implementing robust security protocols, maintaining transparency about potential threats, and educating consumers can significantly mitigate this issue. A comprehensive approach, integrating both legislative and self-policing solutions, will be instrumental in restoring fairness and credibility to the gaming industry.

Until such measures are in place, the gaming experience will be tainted by the shadow of fraudulent activity. For every tournament champion, countless others could have been deceived and denied their fair shot at winning. The need to reshape the gaming landscape, equipping ourselves to combat fraudsters who have manipulated these games from the outset, is clear.

In light of the UK’s enactment of the FSMA, it is worth exploring whether a similar law could effectively safeguard American gamers from real-money gaming scams.

Table Stakes in the UK

FSMA introduces comprehensive reforms that will affect nearly all financial services firms and their users. These reforms aim to bolster the UK’s position as an international hub for global financing, promoting innovation without compromising financial stability. The act seeks several outcomes:

  • Enhance the competitiveness of UK markets
  • Harness innovative technologies in financial services
  • Promote effective use of capital
  • Support the UK’s role as an independent trading nation

To accomplish its mission, FSMA seeks to establish a “smarter regulatory framework,” replacing existing retained EU law on financial services and markets while introducing other changes to update the UK regulatory regime.

  • Push Payments — One of the key provisions of the FSMA is to protect potential victims of authorized push payment (APP) scams. These schemes trick people and businesses into sending money to fraudsters posing as legitimate payees. They may claim to have supplied a product or pose as a legitimate account holder to persuade bankers to redirect funds. Under FSMA, the UK’s Payment Systems Regulator can now use its regulatory powers to mandate reimbursement of scam victims by payment service providers. This provision imposes a new obligation on providers who should respond with additional safeguards.
  • Tighter Controls — In addition to addressing APP scams, the FSMA introduces several other provisions to combat online money fraud. For instance, the act places a regulatory burden on firms to secure permission from the Financial Conduct Authority before approving the financial promotions of unauthorized firms. The FSMA also expands the range of circumstances under which regulators can impose conditions on approval for a change in control of an authorized firm. Moreover, the FSMA obligates the Treasury to amend the nation’s money laundering regulations. This is a significant advancement towards tackling fraud, providing firms with incentives to actively prevent devious activities and promoting transparency about their customer treatment. Victims will benefit from consistent minimum levels of protection.

US Approach

When it comes to online real-money gaming, US consumer fraud protections remain fragmented. The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) permits license revocation if a gaming company is found to be engaging in fraud. Online casinos must strictly adhere to US gambling regulations and submit audits regularly to safeguard player funds and ensure fair play. They must impose responsible gambling measures to curb harmful gaming behaviors:

  • Setting betting limits
  • Providing self-exclusion options
  • Limiting deposit amounts

Online gambling sites should prioritize the well-being and safety ofplayers to create a more enjoyable and secure gaming environment and shield themselves from potential civil actions.

As there is currently no law in place that protects gamers specifically from online credit card and banking fraud, APP scams, and other forms of theft, the US is likely to investigate the passage of an FMSA-like law, especially as real-money, skill-based gaming gains traction. A federal gaming commission could license and monitor operators, mandate fraud prevention measures, investigate complaints, and allow players to recover losses from provably fraudulent schemes. Industry leaders argue national standards would better protect consumers and lend credibility to the nascent market.

In the meantime, some states have enacted consumer protection laws specific to real-money gaming. New Jersey, a hub of legal online gambling, mandates stringent licensing criteria focused heavily on responsible gambling, security, and fairness. Operators must submit to rigorous auditing of their betting systems for integrity. However, NJ laws still do not directly tackle fraud protection. Nevada goes further by explicitly prohibiting fraudulent acts by licensees against players. Enforcement relies on the Nevada Gaming Control Board, which, though powerful within the Silver State, lacks the full authority of federal regulators. New Jersey and Nevada are two notable exceptions to the rule; only a handful of states have real-money gaming-specific regulations.

This patchwork of state laws leaves broad gaps in oversight, allowing disreputable operators to take advantage of players nationwide.


  • Jurisdictional Compliance: A lawyer can provide invaluable assistance in navigating the intricate web of laws and regulations governing real-money gaming. These laws vary widely by jurisdiction and are continually evolving. Lawyers can help gaming platforms understand their obligations under these laws, ensuring they remain compliant and limiting their exposure to legal and regulatory risks.
  • Documentation: Lawyers can guide gaming platforms in structuring their terms of service and privacy policies to ensure they meet legal requirements while also protecting the platform’s interests. They can also help devise strategies for verifying player identities and ages, a critical aspect of compliance with many gaming laws.
  • Monitoring and Control: A lawyer can help gaming platforms develop robust internal controls to prevent, detect, and respond to financial fraud. Such controls might include transaction monitoring systems to identify suspicious activity, procedures for investigating potential fraud, and protocols for reporting fraud to relevant authorities.
  • Response and Resolution: Lawyers can also advise on best practices for responding to fraud, including how to communicate with affected players and manage potential reputational damage, advise on potential liability, represent the platform in litigation or regulatory proceedings, and negotiate settlements where appropriate.

Gamma Law is a San Francisco-based Web3 firm supporting select clients in complex and cutting-edge business sectors. We provide our clients with the legal counsel and representation they need to succeed in dynamic business environments, push the boundaries of innovation, and achieve their business objectives, both in the U.S. and internationally. Contact us today to discuss your business needs.


David Hoppe

All stories by: David Hoppe

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