Sadly from my anecdotal observations it seems all too often that people do in fact realize their teammates are cheating, whether it's queued randoms or a group of friends where one guy is cheating and the rest are "clean" but benefitting from out of game info over voice comms. But then they refuse to do anything about it. I imagine it's because they get the high of an easy win without the guilt or shame of using "real" cheats since they're not the ones who paid for / installed them.

In my defense, I was playing Bedwars (competitive Minecraft mini-game with floating islands, ability to make bridges across them, purpose being to break other team's beds), and once I found out there was a cheater in my team, I left my team's bed with no protection, to make the game easier for the "clean" players. It didn't work, the cheater in my team eliminated all the other players.

My personal experience (mostly TF2) is that a lot of players just don't pay attention to chat and votes.

I mean this is bog standard human behavior.

"Jon is a drug dealer, but his money still spends"

"Tom is insider trading, but I'm not since I don't actually 'know' that"

etc, etc