It might actually be? That's a curious question. In reality I doubt any business would bring it up as their discrimination would get them in much bigger trouble with the law, but the law does allow for multiple parties to be incorrect.

Are there any lawyers here who know if there is case law showing someone getting prosecuted for fraud when the fraud in question was to avoid already illegal activity?

The answer is what you’d expect it to be if you simply applied common sense, namely, that you can’t prevail on a fraud theory if you’re committing unlawful discrimination and the false representation being relied upon can’t lawfully be relied upon in a decisionmaking process.