It doesn't even know the rules, let alone cheat. It predicts the notation from the massive amount of games seen during training.
Edit: although thinking of it, it probably anazyled a shitload of chess books too. It might have a lot of knowledge compressed into the internal representation. So yeah, maybe it knows rules in some form and even some heuristics, after all. It just doesn't understand the importance of making legal moves, and can't apply complex theory (requiring it to run stateful algorithms).
If you have played with ye olde flip phone's T9 predictive feature as a child, trying to compose entire messages just by accepting the next word that comes to the phone's mind... that's ChatGPT, with the small difference of giving waaay better suggestions for the next word. But other than that, there is no understanding in the black box whatsoever.
That heavily depends on your definition of understanding, which is not easy to define. The vague definition I imply here is "the ability to make predictions based on higher order correlations extracted from the training data".
