Online Casino Chip Dumping

Online gambling remains largely illegal in the U.S., with only a few notable exceptions. Perhaps one of the reasons for this is the wide variety of illegal activities that can be conducted online under the guise of gambling. Gambling is an industry that is very difficult to regulate under the best of circumstances and online gaming makes it even more challenging. There are a number of practices that are both illegal as well as violating the terms and conditions of the casino itself. Chip dumping is one practice that at best violates the terms and conditions of the casino and at worst is in service of other types of illegal activities. Here is an overview of online gambling chip dumping. What it is, how it happens, why it is illegal and what can be done to prevent it.

What is Chip Dumping?

Chip dumping takes place in online poker games. While there may be many reasons for chip dumping, it is the practice of one or more players purposefully and intentionally losing to another player, thereby transferring their poker chips (and the money they represent) to that player.

What is the Purpose of Chip Dumping?

The reasons for chip dumping range from attempts to defraud the casino itself or other players to money laundering or even paying for illegal services. Here are some of the primary reasons for online gambling chip dumping and why they occur.

  1. Signup bonus fraud: Most online casinos will offer a range of bonuses to encourage play at their casino. These bonuses include signup bonuses and other ongoing promotions. Generally, when the casino runs any type of promotion, there is a rollover requirement, which prevents customers from simply signing up and then immediately withdrawing their bonus. For instance, a casino may offer up to a 100% matching deposit bonus. If a new player deposits $500, they would receive $1,000 in chips, coins, tokens or other online currency. In order to withdraw this bonus, however, they generally have to engage in a certain amount of gameplay or, in essence, "risk" the total amount a certain number of times. This is called a rollover requirement. For instance, on a $500 bonus, the casino may require players to place at least $1,500 in bets or risk at least $1,500 in some way. This would be a 3X rollover requirement.

    Chip dumping is a means of fulfilling the rollover requirements in order to claim the bonus without ever being in danger of losing their original stake. For instance, if four people sign up together and agree to lose to each other, then they can all withdraw their initial deposit plus the additional bonus. Because of the high dollar amounts involved in poker, not only does it create a no-risk way of fulfilling the rollover requirements, but it can also be achieved fairly quickly.
  2. Tournament Play: Many casinos will host online poker tournaments, with a large cash prize being paid out to the winner. In this situation, one player will often stake several other players to give themselves an advantage. Chip dumping allows one individual to accumulate a larger stack than all of the other competitors, giving them both a financial as well as a psychological advantage.
  3. Money Laundering: Large banking deposits are generally subjected to close scrutiny by most governments. Large sums of money that are earned through illegal activities cannot be used for most legal enterprises, such as investing or even making large purchases. Winnings from gambling, however, are considered legal income. A large illegal enterprise, therefore, can stake dozens of players to chip dump to a single individual in each game. Those individuals can each walk away with several thousands of dollars worth of legal winnings, which can then be deposited in banks and claimed as legitimate earnings.
  4. Payment for illegal activities: Another way that chip dumping can be used to cover criminal activities is by using it to pay for illegal services. Some illegal services can cost upwards of $50,000 or more. Taking out a cash withdrawal of that much money might raise suspicion and it also creates a paper trail. While cryptocurrency can also be used as a way of paying for illegal services and activities, cash or legitimate currency still has to be converted into cryptocurrency, which can sometimes raise suspicion in and of itself. Instead, clients can simply "lose" a certain amount of money to an anonymous player in an online casino. The winner can then withdraw their winnings in cryptocurrency to maintain their anonymity and the winner has a perfectly viable paper trail to show for their losses. In some countries, they may even be able to claim this loss as a tax deduction.

Chip Dumping Detection & Prevention

Most online casinos have a wide range of tools to help them track illegal and fraudulent activities. Most casinos are required to ask for government-issued identification before allowing a deposit, although those can certainly be forged or even stolen. When cryptocurrency is used, there is no way of knowing for certain whether the person playing is the legitimate owner of the identification that was presented to open the account. The ability to withdraw funds in cryptocurrency also thwarts the attempts of government agencies to track online gambling winnings being used for payment for illegal services.

It does not stop casinos being able to track and detect chip dumping activities, however. Most casinos use automatic fraud detection software that can alert the casino's collusion department. Once the department has been alerted to potentially fraudulent activities, a collusion expert can manually investigate the matter. If the collusion expert determines foul play, then they can disqualify the defaulter or in some cases ban them from the casino entirely. Most casinos have a waiting period of up to 48 hours between when a withdrawal request is submitted to the time funds are disbursed. This gives them time to manually check gameplay to determine if any fraudulent activities are suspected.

iovation is a leading provider of fraud prevention and detection solutions as well as advanced MFA software for online banking, e-commerce, insurance, online casino gambling, online communities, and travel and ticketing organizations.

Ready for the next step?

In just minutes, we’ll show you how to improve your customer authentication experience, stop fraud and save money.

Fraud Prevention

Spot user behaviors and device information that’s suspicious, and stop those fraudsters in real time. We track billions of devices and our fraud analysts add evidence to make this intelligence even more effective.

Stop Online Fraud

Ready for the next step?

In just minutes, we’ll show you how to improve your customer authentication experience, stop fraud and save money.