Brazil’s Regulated Betting Market Is Thriving on Paper, But Taxes and Illegal Operators Are Quietly Eating Away at Its Foundation

Key Points

• Sixty-five point three per cent of Brazil betting executives consider tax as their biggest business problem in 2026 even though there have been BRL5.89 billion in tax revenues in just five months of the current year.
• The black market segment of the betting industry continues to represent about half of the total industry activities generating an estimated annual loss of BRL10.8 billion for public coffers.
• Seventy-one point seven per cent of respondents are dedicated to expanding their business in Brazil, but they face growing regulatory challenges compared to commercial interests.

After 18 Months of Regulation, Brazil’s Betting Market Faces a Question Few Expected

The regulated betting system was introduced in Brazil on 1 January 2025. In less than one year, the country had established itself as the fifth largest betting nation in the world, second only to the USA, UK, Russia, and Italy, based on research carried out by an international consulting firm Regulus Partners. Brazil collected taxes worth BRL9.95 billion in a year and the total amount was up to BRL5.89 billion in just five months of 2026, which represented an 86% increase from the corresponding period in 2025.

A new independent report, the Brazil Betting Outlook 2026: One Year into Regulation, published by SBC Insights and drawing on survey responses from 56 senior executives across operators, suppliers, regulators, and independent legal experts, puts a number to something the industry has been quietly debating for months. When asked about the single biggest operational challenge facing the market, 65.3% of respondents pointed to taxation, while 48.9% believe current advertising restrictions already represent a significant obstacle to long-term growth, and 46.8% identify regulatory clarity as the single most important factor for a successful regulated market.

The Tax Problem No One Can Quite Resolve

Upon the launch of its regulated gambling market, licence fees were at BRL30 million per company and a tax rate of 12% on the gross gaming revenue of the businesses. Through the signing of laws by President Lula at the end of 2025, this will increase to 13% in 2026, 14% in 2027, and 15% from 2028, with a percentage dedicated to social security payments. After including PIS and COFINS payments in the tax obligation of the companies, it was discovered through the analysis of the Institute of Responsible Gaming conducted by LCA Consultoria that the total obligation for the companies amounted to 32% in 2025.

Gambling companies that received licences in 2024 did so with the former tax rate in mind. They are currently operating with higher and continually rising rates. In the first quarter of 2026, the Federal Revenue Service earned BRL3.4 billion from betting companies. Those numbers validate Brazil’s fiscal ambitions. What they do not yet answer is how many operators will absorb three further years of rising rates and remain commercially viable.

Advertising Restrictions: A Political Fight Spilling Into Commercial Strategy

Taxation grabbed the majority vote, but advertising restrictions are running close behind. Some 20.4% of survey respondents flagged legislative changes around marketing as a significant challenge, and nearly half, 48.9%, believe current restrictions already represent a meaningful obstacle to long-term market growth.

The source of that anxiety sits largely with Bill No. 1,212/2025, tabled by Saulo Pedroso, President of Brazil’s Sports Committee, which seeks to severely limit gambling marketing across the country. The bill gained visible momentum in July 2026, when a public hearing convened by Pedroso brought together health experts who drew direct comparisons between the current landscape and the era of unrestricted tobacco advertising in Brazil.

Leonardo Carriço, a gambling disorder specialist, cited approximately 1.4 million Brazilians currently living with gambling-related behaviour disorders, with a further 11 million considered at risk. Gabriella Boska, Coordinator of the Department of Mental Health with Brazil’s Ministry of Health, went further, linking problem gambling and the associated indebtedness directly to rising suicide rates.

On the other side stood Brazil’s Secretariat of Prizes and Bets (SPA) and the Brazilian Institute for Responsible Gaming (IJBR). Fabio Macorin, Deputy Secretary for SPA under the Ministry of Finance, defended the current framework: “It is prohibited, for example, to pressure the user to bet immediately, with messages such as ‘bet now’ or ‘enter now’.” Macorin added that operators are equally barred from framing gambling as a financial solution or pathway out of debt.

Carlos Lima, President of the IJBR, argued that tighter restrictions would not reduce gambling in Brazil; they would redirect bettors toward unlicensed platforms, with the illegal market still representing about 50% of the sector.

The Illegal Market: A Parallel Economy That Regulation Has Not Yet Shrunk

That 50% figure is not an outlier. Research by the Locomotiva Institute with LCA puts the clandestine market’s annual turnover at approximately BRL40 billion ($7.7 billion), with Carlos Lima estimating the annual public finance loss from unlicensed operations at BRL10.8 billion.

Brazil’s response has been direct. President Lula signed Decree 13,033/2026 in June, introducing what the Finance Ministry described as a strategy of “financial asphyxiation” targeting the payment infrastructure of unlicensed operators rather than chasing individual websites. Ordinance No. 1,766/2026 accompanied the decree, establishing joint liability for financial institutions, payment companies, and advertisers connected to irregular fixed-odds betting. Authorities have blocked 56,000 illegal platforms and frozen BRL951.1 million in a single Federal Police operation.

ANJL President Plínio Lemos Jorge confirmed that illegal bets still represent between 40% and 50% of all operations in the country, with licensed operators recording BRL37 billion in gross income last year, suggesting the clandestine sector generates figures starting at BRL29.6 billion completely outside government oversight. If rising taxes or advertising bans make the licensed market commercially unattractive, operators and bettors alike will flow back toward clandestine platforms. The result would be less revenue collected, not more.

Operators Are Still In, But With Caution Replacing Confidence

Against that backdrop, the survey data carries a particular weight. Of the 56 executives surveyed, 71.7% remain committed to expanding their operations in Brazil, with 21.7% pursuing aggressive growth. The average optimism score reached 3.26 out of 5, and 68.2% believe Brazil will reach a mature regulated market within the next two to five years.

The research was conducted during and immediately after SBC Summit Rio 2026, meaning respondents were, by definition, people active enough in the market to attend a major industry event. The 3.26 score reflects a market where confidence has not collapsed, but where the enthusiasm of early entry has been replaced by a more measured read of operational realities. If monthly collections continue at their current pace, annual revenue could exceed BRL14 billion (US$2.8 billion).

Expert Analysis: The Risk Sits Between Two Policy Levers

The question is whether the two policy levers now under active political pressure, taxation and advertising, can be tightened simultaneously without pushing a meaningful portion of that growth back into the illegal sector.

The illegal market does not absorb a tax increase. Licensed operators do. Each percentage point added to the GGR levy widens the price gap between compliant platforms and clandestine ones. Each advertising restriction narrows the licensed market’s ability to attract new bettors through visible channels, which again benefits unregulated operators competing without those constraints.

Operators who acquired licences did so when the tax rule was set at 12% of GGR, and the rising burden is a direct concern for commercial sustainability. Whether the political environment allows the regulatory architecture to hold as elections approach and public health campaigners grow louder is the variable executives are now watching most closely. What comes next depends on whether the government can resist conflating commercial sustainability with insufficient regulation.