Last year, in response to a wave of gamers using software to fake their locations, the company behind the location-based game Pokémon GO decided to lay down the law. For the first time, Niantic published a list of actions that could result in a ban—including faking a GPS location, a tactic some players had been using to gain an edge.

For Ryan John King, the co-founder of a company trying to create a crowdsourced alternative to GPS, the episode underscored a problem his startup had already been trying to tackle. “As soon as anything of value is at stake, GPS can be spoofed really easily,” Mr. King said. The idea of Foam, the company he created with co-founders Kristoffer Josefsson and Katya Zavyalova, is to build an alternate system of verifying location that can’t be gamed.