ILLEGAL BETTING MARKET IN BRAZIL:
GROWING RISKS THAT REQUIRE IMMEDIATE ACTION

The recent legalization of fixed-odds betting in Brazil marked a decisive step in formalizing a sector with enormous economic and tax revenue potential. In the first five months of 2025 alone, tax revenues from betting houses totaled R$ 3.026 billion.

However, as the regulated market consolidates, the presence of illegal operators remains a significant challenge. Unlike authorized companies, which comply with strict security and oversight standards, clandestine platforms operate outside the law, free from any form of control. This absence of supervision makes them fertile ground for illicit practices such as money laundering, while also exposing bettors to fraud and heightened risks.

An emblematic example of the clandestine segment is the use of the online sports betting market by criminal factions for money laundering operations—a reality already highlighted in the Technical Note prepared by the Esfera Institute for Studies and Innovation and in the Report issued by the United Nations Office on Drugs and Crime. The growth of this illegal market not only generates significant economic losses for the state and licensed operators but also exacerbates harmful social impacts, heightening the vulnerability of sensitive groups, particularly adolescents and young people.

The issue of illegal betting is not restricted to Brazil's borders, but is a global challenge faced by many nations. Analysis of international experiences reveals that countries that have been successful in combating illegality combine strategies such as agile and competitive licensing, financial enforcement instruments, and strict responsible gaming policies.

Combating the illegal betting market requires an integrated strategy that goes beyond simple repression. It is essential to combine technological oversight measures, strengthened cooperation between national and international agencies, and effective civil and criminal liability. At the same time, steps must be taken to ensure that the regulated market is more competitive and attractive, through careful licensing processes, balanced taxation, and awareness campaigns that guide consumers toward safe and authorized options.

1.     THE POWER OF THE ILLEGAL MARKET AND ITS SOCIO-ECONOMIC AND LEGAL CHALLENGES

Despite the legalization of fixed-odds betting and regulatory advances, the persistence of illegal operators remains a critical challenge, threatening the credibility of the sector, weakening competition, and imposing social and economic risks on Brazil.

The current scenario, according to data from the Ministry of Finance's Secretariat of Prizes and Bets (SPA), reveals a sector in full consolidation. To date, 181 brands or “bets” have been authorized, out of a total of 300 applications for authorization.

However, this formalization process contrasts with the impressive expansion of the illegal market. Between October 2024 and February 2025, SPA-MF requested Anatel to block 11,555 clandestine websites.

The impacts of the illegal market are worrying, affecting various segments of society. A recent study conducted by Instituto Locomotiva in partnership with the Brazilian Institute for Responsible Gaming (IBRJ) identified widespread exposure of users to the illegal betting market. The survey revealed that most of the bettors interviewed between April and May of this year had come into contact with unregulated platforms, with the 18-29 age group standing out, in which the incidence of illegal betting reaches a significant 69%.

The survey revealed that 78% of respondents recognize the difficulty for ordinary users to identify which platforms are, in fact, regulated. In addition, 72% said they were unable to verify all the details necessary to ensure the legality of the sites on which they bet. As a direct consequence, 73% of bettors admitted to having used at least one of the illegal platforms mentioned in the survey.

The most alarming data, in our view, shows that 77% of respondents stated that they gamble exclusively in irregular environments—clear evidence of the seriousness of the problem and the combination of ignorance and preference that still keeps a significant portion of users away from duly authorized options.

From an economic standpoint, the illegal betting market imposes a significant loss on the country. According to a study by LCA Consultoria in partnership with IBRJ, the clandestine segment represents between 41% and 51% of the entire sector, generating estimated annual revenues of between R$26 billion and R$40 billion. In contrast, the legal, already regulated market reaches approximately R$38 billion per year.

Illegality not only distorts competition, but also results in an estimated loss of tax revenue between R$7.2 billion and R$10.8 billion annually, considering a tax burden of around 27% on Gross Gaming Revenue (GGR).

Although the Brazilian government has intensified its efforts to combat illegality, such as blocking illegal websites by Anatel and notifying banking and payment institutions for providing financial services to illegal betting websites, these measures have proven insufficient to curb illegal betting in the country. Even after the banning of illegal websites, clandestine operators have adapted their strategies, directing users to other betting mechanisms, according to a report published in February 2025.

The growth of the illegal betting market causes profound and unacceptable damage on all fronts: society is exposed to escalating social risks, particularly among young people; the government loses billions in revenue that could otherwise finance public policies; bettors are left vulnerable to fraud and unprotected due to the absence of guarantees; and legally authorized platforms face unfair competition that undermines the credibility of the sector. Tackling illegality is not merely a regulatory option but an urgent necessity to protect citizens, ensure fiscal justice, and preserve the integrity of a market that can only remain sustainable if guided by legality and transparency.

2.     INTERNATIONAL LESSONS AND REGULATORY APPROACHES TO COMBATING ILLEGAL BETTING MARKETS

The illegal betting market is a global challenge faced by different countries based on their specific legal, social, and regulatory characteristics. Despite these differences, regulation of the sector converges around common objectives: protecting players from risks and abuse, preventing money laundering, ensuring the integrity of sports competitions, and generating revenue for the state.

The Chinese experience illustrates a regulatory model centered on prohibition and state monopoly. In China, betting is permitted only through official lotteries—the China Welfare Lottery and the China Sports Lottery—while all other forms, including online betting, are strictly prohibited and subject to criminal penalties. Nevertheless, despite this highly restrictive legal framework, China accounts for more than half of the global illegal betting market’s financial volume, according to a UNODC report. This is because illegal operators based in neighboring countries with more flexible rules target both Chinese and international players through their platforms, defrauding millions of people. Thus, the Chinese model demonstrates that repression alone is insufficient to contain the expansion of illegal betting and underscores the limits of regulatory policies based exclusively on prohibition.

On the other hand, countries such as the United Kingdom, Malta, and Sweden authorize casino games and betting, operating well-established and highly regulated markets with agencies dedicated to supervising and licensing operators. In general terms, the most successful countries in the gaming sector combine: (i) a competitive licensing model that enables the entry of suitable operators; (ii) financial enforcement tools and accountability mechanisms for intermediaries, with a focus on the B2B[1] ecosystem; and (iii) robust responsible gaming and sports integrity policies that enhance consumer confidence and strengthen market transparency.

In this regard, the B2B license (for suppliers) has been gaining prominence, requiring studios, platforms, aggregators, and software providers to only serve licensed operators, which reduces the supply to illegal sites, discouraging demand.

One measure that has proven effective in combating the illegal market is making licensed offerings the best option—if not the only option—for consumers. In the United Kingdom, centralized regulation by the Gambling Commission, under the Gambling Act of 2005 and subsequent regulations, has become a paradigm of balance between market access and consumer protection. Since 2014, the British system has adopted a “point of consumption” regime, under which operators must obtain a local license and demonstrate, at the time of application, their suitability, governance, and technical controls in accordance with the comprehensive British regulations, particularly the Licence Conditions and Codes of Practice (LCCP).

In addition to B2C operating licenses, the country requires licenses for “gambling software” (both remote and non-remote) and “remote gambling equipment,” equivalent to B2B licenses. This means that anyone who develops, supplies, installs, or adapts gaming software must obtain specific authorization and comply with conditions such as customer due diligence, data segregation, auditable logs, and cooperation with the Commission. The practical consequence of this requirement is the strengthening of the fight against the illegal market, since licensed suppliers are prohibited from distributing games, wallets, or betting platforms to unauthorized operators, under penalty of fines and loss of license.

Sweden strengthened its B2B framework in 2023 by introducing licenses for gaming software providers, administered by Spelinspektionen (the Swedish authority responsible for gambling control). The objective was to curb illegal betting and gaming, since those authorized to operate gaming software are prohibited from manufacturing, supplying, installing, or adapting such software for unlicensed B2C operators.

The Swedish authority also enforces the following measures: a public list of legal domains, geoblocking, a ban on advertising by unlicensed operators, and a self-exclusion register (Spelpaus). Integration with Spelpaus is mandatory, which may indirectly affect the illegal market, as players recognize the additional protection offered within the regulated channel and migrate to it.

Malta has pursued an incisive policy and adopted a very promising regulatory framework, which deserves our attention. In 2018, with the enactment of the Gaming Act, it consolidated two license categories: the gaming service license (B2C license) and the critical gaming supply license (B2B license).

The B2B license for “critical supply” covers: (i) the supply and management of the material elements of a game; and (ii) the supply and management of software, either as a stand-alone system or as part of a system, used to generate, capture, control, or process any essential regulatory record and/or the control system itself in which such software resides. The Maltese model establishes technical standards, information security requirements, business continuity measures, and independent testing. It also empowers the Malta Gaming Authority (MGA) to impose proportionate measures—such as warnings, fines, or suspension—when a supplier provides services to operators outside the regulated perimeter.

In Canada, the province of Ontario has structured iGaming under the supervision of the AGCO (Alcohol and Gaming Commission of Ontario) and iGaming Ontario, requiring registration for both operators and gaming-related suppliers (B2B). The regime obliges suppliers to comply with technical integrity standards (certifications, audits, logs), implement anti-money laundering (AML) measures, and conduct KYC (know your customer) verification proportionate to risk. Above all, it prohibits business with unauthorized sites within the territory. The AGCO also enforces advertising blocks, cooperates with internet service providers, and takes action against affiliates that direct traffic to unlicensed websites.

Every day, more countries are imposing responsible gaming and enforcement measures, such as the United Kingdom, which adopts robust measures related to player protection in regulated channels, reinforcing the migration to the legalized environment. To this end, it prohibits the use of credit cards—as is the case with platforms that operate legally in Brazil—; introduces strict age and identity checks for online gaming; requires all gaming establishments to be registered with GAMSTOP (self-exclusion program); and requires that, upon each login, users view information about the licensee's responsible gaming measures, their deposit limits, and their total accumulated losses over the previous 12 months.

Comparative analysis shows that countries that have made progress in combating illegality have adopted balanced regulations, with competitive licensing, accountability for suppliers and operators, technological oversight, and consistent responsible gaming policies. These measures have increased consumer confidence, reduced the space for clandestine operators, and ensured public revenue collection. Like international betting markets, Brazil needs to consolidate a safer and more competitive sector, in which there is no room for illegality.

3.     BRAZIL IN TRANSITION: REGULATORY ADVANCES AND CHALLENGES FOR CONSOLIDATING A SAFE AND SUSTAINABLE BETTING MARKET

Brazil is undergoing a phase of regulatory consolidation in the fixed-odds betting and lottery market, with a focus on organizing the sector. Legalization began with Law No. 13,756/2018, which, in addition to legalizing the activity, established guidelines for the allocation of funds collected from lotteries, including fixed-odds betting, and created the National Public Security Fund (FNSP).

However, detailed regulation of the sector only came into effect with Law No. 14,790/2023, which established rules for the functioning of the market with a focus on security, transparency, and accountability. The main provisions of the law include: authorization to operate in the market; mandatory use of the “bet.br” domain; the requirement that operators be Brazilian legal entities registered in Brazil, with at least 20% of their capital from Brazilian sources; adoption of policies for the prevention of money laundering, responsible gaming, and cybersecurity; prohibition of participation by minors under 18 and by persons with conflicts of interest[2]; maintenance of auditable systems; taxation of prizes at 15% and of companies at 12% on gross revenue; and the establishment of fines for non-compliance, among others. SPA/MF Ordinance No. 827/2024 further guided SPA’s actions by detailing the requirements for private companies to obtain authorization to operate in the sector.

Brazilian market regulation has advanced consistently, imposing strict requirements for companies to operate in fixed-odds betting and establishing an extensive list of compliance obligations. Authorized operators must undergo a rigorous accreditation process and are subject to constant supervision. The biggest challenge, however, lies with those who remain outside the law: unauthorized platforms that ignore regulation, operate without transparency, and undermine the integrity of the system.

Desde 2024, o Ministério da Fazenda vem estruturando uma agenda normativa que, em 2025, ganhou corpo com novas portarias, projetos de lei e medidas provisórias. O objetivo principal é: organizar o setor, garantir a proteção do consumidor e combater o mercado ilegal.

Last April, SPA published Ordinance SPA/MF No. 817/2025, establishing the regulatory agenda for the coming years, with a detailed implementation schedule running from the second quarter of 2025 to the end of 2026. The agenda is organized into three pillars: promoting responsible gaming, preventing pathological betting, and mitigating negative externalities; creating a balanced and transparent regulatory environment; and strengthening regulation and oversight at the national level. Among the initiatives announced, the creation of a National Betting System stands out, which will seek coordination with states and municipalities to standardize technical requirements, disseminate best practices, and intensify the fight against money laundering. In addition, there are plans to implement a distinctive seal for authorized operators as a tool for consumers to quickly identify regular companies, differentiating them from illegal platforms[3].

In May, SPA/MF Ordinance No. 566/2025 was published, prohibiting financial and payment institutions and payment arrangement companies from conducting or allowing financial transactions by companies that illegally operate fixed-odds betting.

In parallel with the Ministry of Finance's agenda, the National Congress has also advanced regulatory expansion. In June, a package of 17 bills was introduced in the Senate, aligned with the discussions of the CPI das Bets (Betting Parliamentary Inquiry Commission). Among the proposals, Bill No. 2,889/2025 stands out, suggesting the creation of a National Betting Registry to centralize information on operators and users, thereby strengthening oversight. The legislative package also includes the classification of new crimes, such as unauthorized betting, illegal advertising targeting minors, and facilitating transactions for clandestine platforms. Other measures under consideration include limiting the hours and channels for betting offers, prohibiting betting by individuals registered with CadÚnico, and requiring banks to provide voluntary betting-blocking mechanisms.

Another noteworthy project that deserves mention is Bill No. 4,044/2025, known as the Legal Framework for Combating the Illegal Gaming and Betting Market. Recently introduced in the Chamber of Deputies, the bill aims to strengthen financial, criminal, and administrative enforcement against the clandestine exploitation of games and betting. Recognizing that the illegal market is undoubtedly the main challenge to be addressed, the bill under review represents a concrete step forward and could mark a significant transformation in the Brazilian regulatory environment

Regulatory changes also occurred through Provisional Measure No. 1303/2025, issued in June 2025, which raised taxation on betting platforms from 12% to 18%, allocating 6% of this total to social security to finance health care starting in October 2025.

Brazil is moving forward with the creation of a regulatory framework for the fixed-odds betting sector, guided by a balance between market organization and consumer protection. The main challenge, however, lies in consolidating a model that ensures legal certainty for authorized operators, provides effective protection for users, and, above all, establishes firm and sustainable mechanisms to combat illegal platforms—without leaving room for setbacks or ambiguities that could weaken the system.

CONCLUSION: ERADICATING THE ILLEGAL MARKET AS A DECISIVE STEP TOWARDS A SAFE, TRANSPARENT, AND SUSTAINABLE GAME SECTOR

Despite the recent legalization of fixed-odds betting in Brazil and notable regulatory advances, the illegal market in this sector continues to pose a significant challenge, requiring coordinated efforts from the state, companies, organizations, and society.

When examining regulatory models, it becomes clear that in cases such as China—where the system is based on extremely strict regulations and severe penalties—the policy has not proven effective. The state monopoly and the ban on online betting, coupled with the criminalization of betting, failed to achieve the intended results and instead created opportunities for an enormous volume of illegal betting through clandestine international platforms. The temptation to adopt a prohibitionist model leads only to regression and the worsening of the illegal market, fostering the growth of unregulated platforms operating in the shadows, without any oversight, supervision, or protection for bettors, thereby empowering criminal groups.

To reverse the rapid growth of the illegal market and mitigate its consequences—while creating a truly safe fixed-odds betting environment—it is essential to implement a multifaceted strategy aligned with international best practices.

The initial step is to make the licensed market more attractive than the illegal one by offering transparency, diversity, and competitive financial returns. To this end, a well-designed licensing model is essential—one capable of attracting reputable operators while ensuring the integrity of operations.

At the same time, it is crucial to adopt financial enforcement mechanisms and strengthen the accountability of intermediaries, particularly within the B2B ecosystem. Requiring software and platform providers to serve only licensed operators—as is already the case in the United Kingdom and Sweden—has proven highly effective in significantly limiting the ability of illegal agents to operate.

Robust responsible gaming and consumer protection measures are also vital to building trust in the legal market. The UK experience clearly demonstrates the effectiveness of these policies in steering players toward safer environments.

In Brazil, initiatives such as consolidating the Ministry of Finance’s regulatory agenda, creating a National Betting System, and adopting a distinctive seal for authorized operators represent decisive steps in this direction.

The actions of the National Congress—through the proposal of laws that combat the illegal market, encourage authorized companies to allocate part of their resources to initiatives of social interest, and establish the promotion of digital and consumer education as a sectoral obligation—are essential for consolidating a more robust, transparent, and reliable regulatory model.

The objectives are clear: to protect citizens against fraud, preserve market integrity, and ensure tax revenues. To this end, combating the illegal market is undoubtedly the central point of the regulatory agenda.

Eliminating the illegal market requires coordinated action among regulators, legislators, and society. The most effective path is not prohibition but smart regulation, which creates an environment that is both safe for consumers and competitive for operators. This strategy must be complemented by awareness and digital education campaigns, empowering consumers to make informed and safe choices.

Only by strengthening regulation, expanding oversight of the entire production chain, and investing in consumer education will it be possible to transform the sector into a safe, transparent, and truly beneficial activity for the economy, Brazilian society, and, above all, consumers, who will enjoy greater security, payment guarantees, and transparency of rules.

*Sobre as autoras

Letícia Ferraz

Diretora de Projetos e Operações do LabSul

Pesquisadora do LabSul

Pós graduada em Direito Público

Formada em Ciências Jurídicas e Sociais pela PUCRS

Vivian Caxambu Graminho

Doutora em Direito pela UFRGS

Coordenadora de Pesquisas em Direito Digital do LabSul

Pesquisadora do LabSul