Every year, millions of Americans buy gift cards only to discover the balance has already been stolen — often without ever knowing why or how. Michigan has now taken direct aim at the scheme behind those empty cards, signing new laws that treat the practice as a serious felony.
The fraud works like this: a thief pulls a gift card off a store rack, copies or photographs the redemption information hidden beneath the scratch-off strip, then places the card back on the shelf. When an unsuspecting shopper buys and activates it, the fraudster drains the balance almost immediately — leaving the buyer with nothing. Under newly signed state laws, Michigan now classifies this “card draining” practice as organized retail crime, a felony offense.
The Michigan Attorney General’s organized retail crime unit — a division solely dedicated to investigating and prosecuting these offenses — will now have clearer authority to pursue gift card fraud cases. Drew Beardslee, vice president of governmental affairs for the Michigan Retailers Association, which worked alongside state lawmakers to craft the legislation, explained why the new classification makes practical sense.
“By putting it under the umbrella of organized retail crime, especially when, in Michigan, we’ve got a unit that is solely dedicated to investigating and prosecuting organized retail crime, it just made sense to put it all under the same statutory framework,”
Beardslee said.
Stiffer Penalties, Clearer Charges
Before these laws took effect, prosecutors had to rely on a patchwork of existing statutes to go after card draining schemes. Earlier in 2026, Michigan’s Attorney General’s office charged a California man with conducting a criminal enterprise and possession of a fraudulent financial transaction device — charges that carried maximum sentences of 20 years and four years respectively.
The new laws set a more targeted standard: a maximum of five years in prison, a $5,000 fine, and restitution payments to victims. The change gives law enforcement a statute built specifically for this type of crime rather than forcing prosecutors to adapt unrelated charges.
A Crime That Often Goes Unreported
One of the biggest challenges in addressing gift card fraud is that many victims never come forward. State and federal officials tracking this issue frequently point to Federal Trade Commission data showing more than $200 million in annual losses to gift card scams in recent years — and that figure likely undercounts the true total.
Beardslee acknowledged the reporting gap directly.
“A lot of times they assume they just got a dud, or it goes unreported and it’s maybe the value they put on it was just not so much they wanted to go back and redeem it. It’s hard to quantify exactly how much it is but it’s certainly something that’s been seen all over the country,”
he said.
Shoppers who discover a gift card has a zero balance often chalk it up to a glitch or an error at the register. That assumption benefits fraudsters, who count on victims walking away rather than filing a complaint. Michigan’s new criminal justice framework is designed in part to make it easier for law enforcement to build cases even when individual victims don’t report the crime.
The push against gift card fraud is part of a broader national trend. Both state and federal agencies have ramped up resources in recent years to combat schemes that target gift card buyers, particularly around the holiday season when card sales spike. Michigan’s move to place card draining squarely within its organized retail crime statutes represents one of the more direct legislative responses to the problem seen at the state level.
