Recently, the Internet of Things (IoT) technology has been drawing increasing attention in that it has a great potential to positively impact human life in a broad range of applications. However, the dense deployment of multiple co-located IoT networks that may follow different wireless protocols would engender new vulnerabilities. In this paper, we introduce a novel attack scenario in co-located IoT networks, where a reactive jammer can emulate the transmission characteristics of a hidden terminal from another network and can interfere with its hidden counterparts, namely the hidden terminal emulation (HTE) attack. As the dense deployment of IoT nodes will naturally create such hidden terminal scenarios, it provides the HTE attacker plausible deniability to reactively interfere with its hidden counterparts; hence, the HTE attacker remains immune to conventional reactive jamming detection techniques. In this paper, we capture the behavior of a benign hidden terminal via a parsimonious Markov model and propose a detection solution using the goodness-of-fit hypothesis testing. Though there has been extensive research on jamming detection, our novelty lies in considering hidden terminals as benign interference sources and leveraging the existing carrier sensing technique as a natural and effective way to detect HTE attacks.