Is scamming illegal?
In most cases, yes. Fraud laws in the U.S. make it a crime to deceive someone for money, property, or services. Online scams like phishing, identity theft, and wire fraud are clearly against the law and can lead to steep fines or jail time.
But here’s the catch: not every shady practice qualifies as a crime. Some scams operate in a gray zone where the tactics are misleading but don’t technically break the law. These are often called “legal scams.” They exploit loopholes, fine print, or gaps in enforcement that let fraudsters skirt the law while still harming people and businesses.
In this blog, we’ll look at three examples of how scammers use online subscriptions, domain billing tricks, and fake stores to deceive people without breaking the law (and why awareness is your best defense).
Is Scamming Illegal?
Yes, scamming is illegal in the United States and Europe. Under 18 U.S. Code § 1343, it’s a federal crime to use email, phone, or other electronic communications to mislead someone for financial gain. Similarly, under Article 280 TEC, the EU declares its readiness to counter fraud affecting financial interests in the Union.
Yet not every shady practice qualifies as a crime. Fraudsters often design their schemes to target businesses by hiding behind fine print, vague disclaimers, or misleading marketing. Subscription traps, fake invoices, and knockoff storefronts can siphon revenue from companies while keeping the scammers technically in the clear, leaving the businesses to deal with chargebacks, angry customers, and reputational damage.
These ‘legal scams’ exploit loopholes and gaps in enforcement, allowing fraudsters to operate in the open. For businesses, this represents direct financial harm from fraudulent transactions and long-term erosion of customer trust. Awareness of these tactics is important, because once a scam is hidden behind legality, prevention (rather than prosecution) becomes the only real defense.
Do Legal Scams Exist?
So-called “legal scams” rely on loopholes, vague regulations, or misleading practices that make them hard to prosecute. A fraudster posing as a business might charge hidden fees, disguise marketing as a renewal notice, or sell low-quality products without ever lying outright.
The difference comes down to intent and proof. Prosecutors must show that someone deliberately deceived a victim to commit fraud. If the deception is subtle or buried in fine print, scammers can skirt the law while still taking advantage of people.
While these tactics may sometimes avoid legal consequences, they can seriously damage trust, reputation, and customer loyalty. For legitimate businesses, relying on “legal scams” is never recommended.
1. Anyone Can Sell an Online Subscription
While phishing and identity theft are illegal, crafty fraudsters have figured out how to accomplish something similar without stepping over the boundaries of law.
Here’s how the scam works: someone sends you an email or text message offering a subscription service. The email or text explains that by signing up on a website, you can receive access to normally expensive streaming services, discounted cloud storage, or low-cost premium content. But the moment you sign up, the subscription service begins charging your account. The user may end up dealing with exorbitant or recurring fees, and will often never receive the item they were promised.
2. Anyone Can Bill You For Your Domain Name
Scammers often take advantage of lax internet laws to charge domain owners for things they don’t need. In a typical scam, a “company” sends an internet domain owner a “renewal” bill. The bill is actually a disguised solicitation inviting the user to transfer domain registration to the company, which then charges the user for the transfer, for the registration, and for submitting the domain address to search engines.
If the “company” is inside the U.S., their invoice must say that they’re solicitors or they can’t bill you, and the invoice often does say that, in very, very small print that’s easy to overlook. But if the scammers are outside the U.S., it’s even easier for them to pull off the job: they’re not legally obligated to describe themselves as solicitors, even if they’re soliciting an American citizen. Often, people don’t even know they’re being scammed.
3. Anyone Can Set Up an Online Store
E-commerce stores pop up all the time, and it’s almost impossible to keep track of which are legitimate, or how we should be defining “legitimate.” For example, although a high-end handbag manufacturer might not be happy about the cheap knockoffs appearing on a rival’s site, many consumers don’t mind having a cheaper option. And technically, many knockoff retailers are operating legally.
But sometimes e-commerce stores toe the legal line a bit more maliciously. There have been many cases in which scammers have set up an online pharmacy, complete with full contact information and qualifications listed on their website. The drugs will be cheaper than those found at your local pharmacy, off-brand, or misbranded, and some won’t require a prescription, even the same drug normally does. If a customer receives the product they paid for, though, and the FDA can’t prove that the drug is misbranded, then the retailer is still operating legally.
Common Types of ‘Legal Scams’
‘Legal scams’ fall into gray areas, with fraudsters using several tactics to avoid prosecution. Here are three of the most common examples:
Selling Online Subscriptions Without Delivering Value
Fraudsters set up subscription services that charge recurring fees for streaming access, premium content libraries, cloud storage, or other digital items that are low-quality or never delivered. Because customers technically agreed to the terms, it can be hard to prove outright fraud.
Charging for Domain Names You Don’t Own
Scammers send official-looking “renewal” notices to website owners, tricking them into paying for unnecessary transfers or services. As long as the notice includes small-print disclaimers, these bills can actually stay within legal boundaries.
Running an Online Store With Dubious Products
Some online retailers sell counterfeit goods or questionable health products. If the customer receives something in return for payment and regulators can’t prove misbranding, the operation may remain technically legal despite misleading practices.
Common Scams That Are Absolutely Illegal
While some schemes exploit loopholes, many scams are clearly against the law. These are the kinds of fraud that prosecutors regularly pursue because the intent to deceive is obvious and the harm is measurable.
- Phishing and identity theft: Tricking victims into revealing personal or financial details to steal money or commit further fraud. This is a common tactic during fake account creation, which in turn can lead to extensive damage to both users and business reputation.
- Credit card fraud: Using stolen card numbers or account details to make unauthorized purchases.
- Advance-fee scams: Convincing victims to send money upfront for services, prizes, or investments that don’t exist.
- Online auction fraud: Listing fake products, collecting payment, and never delivering the item.
Each of these practices are prosecutable offenses that can result in criminal charges, fines, and prison time. Unlike “legal scams,” there’s no ambiguity here.
Legal Consequences of Scams
Even when scams look like minor tricks, the consequences can be severe once they cross into illegality. In the United States, scammers may face:
- Criminal charges: Federal prosecutors can pursue charges under statutes such as wire fraud, mail fraud, and identity theft laws. Convictions often carry prison sentences ranging from several years to decades, especially if the scheme involves multiple victims or large financial losses. Restitution orders are also common, requiring convicted scammers to repay stolen funds. State-level charges may overlap with federal prosecution, adding further penalties.
- Civil penalties: Victims of scams can bring civil lawsuits seeking damages for money lost, reputational harm, or breach of contract. Courts may award compensatory damages and, in some cases, punitive damages. Agencies like the Federal Trade Commission and state attorneys general also have authority to impose civil fines, freeze assets, and secure injunctions that permanently ban deceptive practices.
- International jurisdiction challenges: Online scams often cross borders, making enforcement difficult. While U.S. authorities can prosecute fraud targeting American citizens, pursuing scammers abroad requires international cooperation. These types of fraud can be further complicated by money movement schemes where unwitting third parties move money for the scammers, further obscuring the origin of the scam.
Why Awareness Matters More Than Loopholes
Fraudsters thrive in the gray areas of the law, but businesses and consumers don’t have to fall victim. Understanding how “legal scams” work makes it easier to recognize suspicious offers, hidden fees, or misleading sales tactics before they cause real harm.
For e-commerce companies, the responsibility goes beyond protecting revenue—it’s about protecting customers. Shoppers who encounter subscription traps, fake invoices, or counterfeit products often feel betrayed, even if the business itself wasn’t directly at fault. That loss of trust can quickly ripple into reputation damage and long-term customer churn.
That’s where e-commerce fraud prevention comes in. Platforms like Sift use AI and machine learning to detect risky patterns early, helping businesses stop suspicious activity before it becomes a financial loss. By investing in advanced fraud prevention, companies protect both their customers and their bottom line.
Awareness is the first step, but pairing it with modern fraud prevention tools is what ensures businesses stay ahead of scammers, legal loopholes or not.
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