As prepaid fraud rules tighten, state-by-state compliance becomes the real problem

Prepaid regulation in the U.S. is still mostly a state-level game, which means retailers, card manufacturers, and gift card program sponsors have to track a patchwork of rules instead of one federal standard. Javelin Strategy & Research’s 2026 Prepaid Regulatory Update: States Focus on Fraud and Cash-Outs looks at where those rules changed over the past year and where the next round of pressure is coming from.

1. Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research and co-author of the report, said the key point is simple: anyone following prepaid regulation needs to watch it “state by state.” In practice, that means compliance teams cannot assume a rule approved in one jurisdiction will be acceptable elsewhere.
2. States are taking two different approaches to fraud. Some are targeting the criminals directly, while others are going after the product itself, including packaging designed to stop tampering with cards. The Retail Gift Card Association prefers measures aimed at perpetrators, since product-level requirements can push costs onto businesses and complicate manufacturing and distribution.
3. Maryland remains one of the strictest states on anti-fraud packaging. New York, meanwhile, is proposing to conceal all numbers on the card. John Vogl, Analyst and Content Specialist at Javelin and co-author of the report, noted that New York can become a de facto national standard because issuers and designers often have to build to New York’s rules if they want to sell at scale.
4. If New York’s proposal passes, manufacturers would have just 180 days before it takes effect. That is not much time for changes that can involve the card design, the software behind it, and the packaging on top of it. Retailers sponsoring gift card programs, plus card and packaging manufacturers, would all have to adjust.
5. California is raising its cashback limit to $15, which means gift cards with balances of $15 or less can be redeemed for cash. Hirschfield said that creates more room for theft and fraud, since someone who collects enough cards close to that threshold can turn them into a meaningful payout.

For prepaid and gift card operators, the practical lesson is not subtle: the compliance burden is no longer just about avoiding one bad rule. It is about building products, packaging, and operational processes that can survive the strictest state standard without breaking the economics of the program.