Brazil’s offshore betting economy may now be as powerful as the regulated sector itself. A new legal study suggests the country’s illegal online betting market generates between R$26 billion and R$40 billion per year — figures that place it neck and neck with licensed operators.

Study Points to Massive Parallel Market

The research, published in February 2026 by Massonetto Sociedade de Advogados, estimates that Brazil’s regulated online betting market generates around R$38 billion annually. By comparison, the irregular sector could account for 41% to 51% of total market activity.

The study was led by Luís Fernando Massonetto, professor of economic law at Universidade de São Paulo, alongside sociologist Bruno Braga Fiaschetti and philosopher Eduardo Moraes de Carvalho.

Researchers drew on data from:

  • Instituto Locomotiva
  • LCA Consultores
  • Instituto Brasileiro de Jogo Responsável
  • Yield Sec

Their conclusion: despite the introduction of Law 14.790, most demand has not migrated to platforms licensed by the Secretariat of Prizes and Betting (SPA).

Regulation Raises Costs for Licensed Operators

According to the authors, the structure of Brazil’s regulated betting framework creates strong economic pressure on licensed operators.

Legal companies must absorb:

  • High licensing fees
  • A 12% tax on Gross Gaming Revenue (GGR), rising to 15% by 2028
  • Anti-money laundering compliance obligations
  • Mandatory facial recognition systems
  • Deposit limits and advertising restrictions
  • Profile-based betting bans

The researchers argue that when compliance and tax costs exceed the perceived risks of operating illegally, supply and demand naturally drift toward unregulated platforms.

While acknowledging that consumer protection measures are necessary, the study highlights the cumulative financial weight placed on legal operators.

Why Illegal Platforms Remain Attractive

Unlicensed operators avoid regulatory burdens entirely. That advantage translates directly into commercial leverage.

Illegal platforms can offer:

  • More competitive odds
  • Aggressive promotional campaigns
  • Faster and simpler registration
  • Broader payment methods

The study notes that this pricing flexibility is ultimately passed on to bettors, making offshore options economically appealing — especially when enforcement risks appear limited.

Consumer Confusion Fuels the Problem

One of the more troubling findings is the difficulty players face in distinguishing legal operators from illegal ones.

Survey data shows:

  • 78% of 2,000 bettors struggled to identify licensed platforms
  • The figure rises to 84% among women
  • 61% placed at least one illegal bet in 2025
  • Among 18–29-year-olds, that share jumps to 69%

This confusion weakens the effectiveness of regulation and accelerates capital flight from the licensed ecosystem.

Billions in Lost Tax Revenue

The fiscal implications are significant. Estimates from LCA Consultores suggest Brazil loses between R$7.2 billion and R$10 billion annually in uncollected taxes due to illegal betting activity.

The report outlines a “self-reinforcing circuit”:

  1. Regulation increases legal operators’ costs
  2. Illegal operators exploit the cost gap
  3. Bettors gravitate toward better odds
  4. Tax revenue shrinks
  5. The state increases pressure on licensed firms
  6. The gap widens further

In short, the imbalance may be structurally embedded in the system.

A Long History of Gambling Tensions

The study also places today’s market dynamics in historical context.

Brazil’s relationship with gambling dates back to the “jogo do bicho,” introduced in 1892 by João Batista Viana Drummond as a marketing tool for the Rio de Janeiro Zoo.

During the presidency of Getúlio Vargas in the 1930s, gambling was legalized nationwide. More than 70 casinos operated across the country, employing around 60,000 people. Venues such as Cassino da Urca and the Copacabana Palace became international hotspots.

That era ended in 1946 when President Eurico Gaspar Dutra banned all forms of gambling, citing moral concerns — a move that pushed much of the activity underground.

The authors argue that Brazil’s recurring struggle is less about morality and more about control over a lucrative economic sector.

Summary

Brazil’s illegal online betting market may now rival the regulated industry in size, generating up to R$40 billion annually. High compliance costs, aggressive offshore competition, and widespread consumer confusion are undermining the effectiveness of Law 14.790.

Unless enforcement tightens or the regulatory burden is recalibrated, the gap between legal and illegal operators could continue widening — along with billions in lost tax revenue.