Every year, millions of Americans buy gift cards as presents, only to hand over something that’s already been emptied by a thief. Michigan has now taken direct aim at that problem with a pair of newly signed laws that reclassify gift card fraud as a serious felony offense.
The scheme, sometimes called “card draining,” works like this: a fraudster removes a gift card from a store display, copies or photographs the card’s redemption code, then places it back on the shelf. When an unsuspecting shopper buys the card and loads money onto it, the criminal drains the balance before the buyer ever gets to spend a dime. Under Michigan’s new state laws, that practice now falls under the category of organized retail crime — a felony carrying a maximum penalty of five years in prison, a $5,000 fine, and mandatory restitution to victims.
The Michigan Retailers Association worked alongside state lawmakers to push the legislative changes forward. Drew Beardslee, the association’s vice president of governmental affairs, explained why the organized retail crime classification made the most sense for prosecutors.
“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. That dedicated unit within the Michigan Attorney General’s office now has a cleaner legal path to pursue gift card fraud cases.
How Michigan Was Already Fighting This Crime
Before the new laws took effect, prosecutors had to get creative with existing statutes. Earlier in 2026, Michigan’s Attorney General’s office charged a California man in connection with a multi-state gift card fraud scheme, using charges of conducting a criminal enterprise and possession of a fraudulent financial transaction device. Conducting a criminal enterprise carries a maximum sentence of 20 years in prison, while the possession charge is a four-year felony — steeper than the new law’s five-year ceiling, but far harder to prosecute without a statute tailored to this specific crime.
The new framework is designed to make these cases more straightforward to investigate, charge, and win in court.
A Problem Much Bigger Than Most Realize
Gift card fraud is widespread across the United States, and the financial damage is substantial. State and federal officials have increasingly prioritized the issue in recent years, with lawmakers and advocates frequently citing Federal Trade Commission data showing more than $200 million in annual losses to gift card-related scams in recent years.
Even so, the true scale of the problem may be far greater than those numbers suggest — because most victims never report it. Beardslee pointed to a pattern of silent losses that makes the crime difficult to quantify.
“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.
That underreporting is part of what makes gift card fraud so attractive to criminals — and why advocates say laws like Michigan’s are a meaningful step toward accountability. With a specialized enforcement unit and a clearer legal framework now in place, state officials are better positioned to pursue the organized rings that drive this type of retail crime.
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