Gambling is a naturalistic example of risky decision-making. During gambling, players typically display an array of cognitive biases that create a distorted expectancy of winning. This study investigated brain regions underpinning gambling-related cognitive distortions, contrasting patients with focal brain lesions to the ventromedial prefrontal cortex (vmPFC), insula, or amygdala ("target patients") against healthy comparison participants and lesion comparison patients (i.e., with lesions that spare the target regions). A slot machine task was used to deliver near-miss outcomes (i.e., nonwins that fall spatially close to a jackpot), and a roulette game was used to examine the gambler's fallacy (color decisions following outcome runs). Comparison groups displayed a heightened motivation to play following near misses (compared with full misses), and manifested a classic gambler's fallacy effect. Both effects were also observed in patients with vmPFC and amygdala damage, but were absent in patients with insula damage. Our findings indicate that the distorted cognitive processing of near-miss outcomes and event sequences may be ordinarily supported by the recruitment of the insula. Interventions to reduce insula reactivity could show promise in the treatment of disordered gambling.