From Entertainment to Financial Institution: Why Gambling is Being Regulated Like Banking
Redefining risk in a rapidly growing industry
Over the past decade, the global gambling industry has undergone massive growth and transformation. What originated as a physical entertainment is now a digital experience, enabled by globally connected ecosystems, online platforms, mobile apps, and remote access. This transformation has resulted in a foundational shift in the way risk is defined and managed by gambling operators.
Today, online gambling platforms operate much like financial institutions since they facilitate the rapid and continuous movement of money across borders, currencies, and accounts. As a result, UK and EU regulators are increasingly treating gambling operators as high-risk financial entities requiring rigorous oversight rather than as entertainment providers.
This shift is being led by a surge in AI-driven fraud, synthetic identities, and deepfake technologies. The volume of these crimes is exposing the shortcomings of traditional fraud prevention methods. As bad actors adopt increasingly sophisticated tools, the industry is compelled to rethink its approach around identity risk management and regulatory compliance.
Rise of synthetic identities and AI-driven fraud
Identity fraud in gambling is not a new phenomenon, but the scale, complexity, and automation of fraud have changed and become increasingly harder to detect.
Recent data highlights a drastic growth in financial crimes tied to online gambling, with identity fraud becoming a more significant risk faced by operators. In-person casino identity fraud alone nearly doubled between 2024 and 2025 [1].
Another staggering metric emphasizes the challenge: AI-generated content is now responsible for 1 in every 20 identity verification failures [2].
Fraudsters are no longer operating at the individual level and are leveraging “fraud-as-a-service" ecosystems that enable coordinated attacks at scale. These include:
- Creating multiple accounts using synthetic identities
- Account takeover (ATO) attacks
- Bonus abuse schemes (exploiting promotional campaigns)
- Chargeback (“friendly fraud”) operations
- Affiliate fraud driven by bot networks
This is the new era of AI-driven fraud, where technology is driving both increased risk as well as the tools necessary to counter it.
Regulatory shift from one-time KYC to continuous monitoring
Traditionally, gambling platforms were heavily reliant on know your customer (KYC) and anti-money laundering (AML) checks at the point of onboarding. If a user could pass the identity verification at sign-up, they were largely considered trustworthy from that point forward.
That assumption is no longer true.
Most modern fraud occurs post-onboarding, where accounts that passed initial identity screening are later being used for nefarious activities. In 2024, roughly 85% of identity fraud loss took place in accounts after verification [3]. This has exposed a crucial gap in conventional compliance models.
Consequently, the industry is transitioning from static KYC and AML frameworks to systems that facilitate continuous identity monitoring. Instead of establishing user legitimacy only at onboarding, gambling operators need to continuously assess behavioral anomalies, transaction patterns, network connections, and cross-platform activities.
This evolution highlights a broader understanding that identity is no longer a static attribute, but dynamic and contextual.
UK: Elevating standards on identity and financial risk
The United Kingdom has emerged as a leader in establishing regulatory standards for the financial industry. Financial regulators are focusing on prioritizing digital identity verification requirements, overall financial crime prevention, establishing clear third-party risk oversight, and ensuring data integrity to protect organizations and individual consumers.
Recently updated guidance reinforced how regulated sectors, including gambling, must conduct their digital identity checks under AML frameworks.
UK financial regulators have highlighted several systemic challenges:
- Fraud and cyber risk evolving faster than controls
- Interconnected digital systems amplifying risk
- Growing reliance on third-party providers
- Increased scrutiny of AI-driven decision-making models
These pressures are forcing gambling operators to adopt more proactive, intelligence-driven approaches to identity and fraud prevention.
EU: Recognizing gambling entities as financial institutions
At the EU level, regulatory efforts are becoming more centralized and harmonized, reflecting a deliberate move to integrate gambling into the broader financial crimes framework. This approach positions gambling operators alongside financial institutions, subject to consistent AML oversight and cross-border enforcement expectations, as well as increased surveillance on ownerships structures, financial flows, and hidden connections.
The message has been made clear that gambling platforms will no longer treated as isolated entertainment systems; they are part of the global financial ecosystem.
This regulatory convergence is accelerating demand for real-time monitoring, advanced analytics, and cross-platform identity intelligence capabilities.
Why traditional fraud controls are falling behind
Traditional fraud prevention strategies were built for a different era of risk, previously defined by fixed or physical identities, linear transactions, and isolated threats.
Today’s environment experiences threats from fundamentally different angles, where attacks are:
- Highly coordinated across company and third-party platforms
- Continuously evolving through AI-enablement
- Massively scalable with digital automation
- Distributed broadly across global networks
Most importantly, the nature of fraud itself has shifted. The industry is not seeing more fraud per se, but experiencing more effective and complicated means of its execution.
A common scenario illustrating this challenge may look like this:
A user signs up for a gambling platform and successfully passes all KYC checks, so they’re granted access to betting. Over time it becomes apparent that this “user” doesn’t exist but is one of many synthetic identities within a larger coordinated network that has been programmed and designed to exploit bonus promotions or launder funds.
Within this context, reactive compliance models are insufficient to say the least. Organizations must adopt proactive, AI-powered prevention to ensure continuous monitoring and intelligence.
A case study in modern identity fraud
Recent enforcement actions have uncovered just how sophisticated and deep-rooted the evolution of gambling fraud has become.
In one notable case, two individuals were indicted due to their connection in a $3 million fraud scheme that targeted one of the largest global sportsbooks [4]. Their scheme involved the exploitation of platform vulnerabilities through concerted activities across numerous accounts, as they manipulated data while exploiting strategic betting patterns.
What makes this case particularly instructive is not just the scale of the fraud, but its operational complexity. The scheme was not reliant on a single point of failure; instead, it combined identity manipulation, coordinated behaviors across accounts, and a deep understanding of platform incentives. This kind of iterative, data-driven execution mirrors legitimate growth strategies, making it even more difficult to distinguish fraudulent behavior from normal user activity.
While specific tactics may vary, these cases generally rely on:
- Synthetic identities
- Coordinated account networks
- Exploitation of promotional systems
- Timing and behavioral manipulation
This recent case demonstrates how fraudsters can blend in with legitimate user activity, making detection nearly impossible without advanced analytical systems.
This is where identity intelligence and AI-driven analysis become critical.
Enabling proactive prevention through identity intelligence
To combat identity fraud, organizations must continuously collect and analyze identity intelligence. Identity intelligence goes beyond simple verification measures to form a more complete understanding of who a person is and who they’re connected to, how they behave, and whether their activity aligns with expected or unexpected patterns.
Identity intelligence requires integrating massive amounts of data from various sources including:
- Social media and digital footprints
- Public records and open-source data
- Transactional and behavioral data
By combining these different data streams, companies can build a more complete and up-to-date understanding of identity risk environments.
Supporting the shift with an Agentic Risk Intelligence platform from Babel Street
As the gambling industry evolves into a regulated financial ecosystem, technology platforms must evolve alongside it.
The Babel Street Agentic Risk Intelligence platform delivers the ability to operationalize identity intelligence at scale. By leveraging open-source intelligence (OSINT) and advanced AI models, organizations can:
- Monitor global digital activity across 200+ languages
- Detect emerging threats, sentiment, and intent in real time
- Identify hidden relationships between actors, entities, and events
- Uncover ownership structures and geopolitical exposure risks
Babel Street’s Insights Investigator plays a critical role in connecting fragmented identity signals into a unified investigative view. Using agentic workflows, the platform can automatically ingest disparate data points such as digital identifiers, behavioral patterns, and network associations — and correlate them into coherent identity profiles. This enables investigators to detect synthetic identities, uncover linked accounts, and trace coordinated fraud networks with far greater speed and precision.
By integrating identity intelligence into their workflows, gambling operators can:
- Move from reactive to proactive fraud prevention
- Strengthen KYC AML processes with continuous monitoring
- Improve operational efficiency and reduce risk exposure
Next steps: adapting to a new reality
The convergence of AI-driven fraud, identity risk, and financial regulation has created a new operating environment — one that demands a fundamental shift in how organizations approach security and compliance.
To stay ahead, gaming operators must:
- Adopt a continuous monitoring framework that extends beyond onboarding
- Leverage identity intelligence to understand users in context
- Invest in AI-driven fraud prevention tools capable of matching adversarial sophistication
- Integrate OSINT and external data sources to gain a complete risk picture
- Align with evolving regulatory expectations treating gambling as a financial system
Ultimately, success in this new landscape will hinge on how effectively gambling operators can identify, link, and act on risky identities across the full customer lifecycle — not just at the point of entry, but as behavior evolves over time.
End Notes
1. Cyber Defense Wire, “Casinos Face Record High Rates of ID Fraud in 2025,” Nov 18, 2025, https://cyberdefensewire.com/casinos-face-record-high-rates-of-id-fraud-in-2025/
2. Veriff, “Real-time Deepfake Fraud in 2025: Fighting Back Against AI-Driven Scams,” June 18, 2025, https://www.veriff.com/identity-verification/news/real-time-deepfake-fraud-in-2025-fighting-back-against-ai-driven-scams
3. DuckDuckGoose AI, “Why Identity Fraud Happens After Onboarding, Not During It,” March 19, 2026, https://www.duckduckgoose.ai/blog/why-identity-fraud-happens-after-onboarding-not-during-it
4. U.S. Attorney’s Office, District of Connecticut, “Glastonbury Men Charged with Using Thousands of Stolen Identities to Defraud FanDuel and Other Online Gambling Sites of $3 Million,” Feb 6, 2026, https://www.justice.gov/usao-ct/pr/glastonbury-men-charged-using-thousands-stolen-identities-defraud-fanduel-and-other