Sports gambling is now legal in 38 U.S. states, and it makes up a $114 billion industry world wide. However, a report from Source, “Behind the Screens: The Growing First-Party Fraud Crisis in Online Gaming” has surveyed sports gamblers to uncover the biggest threat to sports betting: users own fraudulent activity.
According to the report, “online gaming accounted for 55% of all first-party fraud incidents, despite it representing only 15% of online transactions.”
In sports betting, first-party fraud can include:
- Disputing bets under false pretenses
- Claiming an account was hacked
- Providing fake personal details
- Falsely stating the bet was accidental
Despite the massive $114 billion size of the industry as a whole, first-party fraud accounts for potential industry losses up to $2.8 billion. And, the peak season for first-party fraud is here.
“Major events like the Super Bowl can send first-party fraud attempts into overdrive – and offenders view their actions as a victimless crime rather than outright fraud,” said the report. It went on to specify that a majority of this fraudulent activity takes place on small bets averaging $109.
According to the report, “Risky transactions jumped more than 206% on Super Bowl Sunday last year.”
- 91% of first-party fraud offenders place Super Bowl-related wagers
- 28% claimed a bet was placed by someone else to avoid losses
- 28% coordinate bets with others to manipulate payouts
- 26% use apps or software to manipulate outcomes
- 25% falsely claim losing bets as accidental to secure refunds
Of American sports betters, one in ten admit to disputing lost bets, with that number increasing during the Super Bowl. Source’s best recommendation for preventing future first-party fraud incidents is an increased reliance on AI-powered fraud detection.
“First-party fraud in online gaming also undermines the trust that keeps legitimate users engaged, forcing operators to adopt stricter policies which can frustrate honest bettors. Needless to say, especially during headline events like the Super Bowl,” said the report.
