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A study published in February 2026 by Massonetto Sociedade de Advogados estimates that the illegal online betting market in Brazil generates between R$26 billion and R$40 billion in annual revenues. The study shows that the legal market generates R$38 billion annually, meaning that the irregular market could account for between 41% and 51% of the total online betting market in Brazil.
The study was written by Luís Fernando Massonetto, professor of economic law at Universidade de São Paulo, together with sociologist Bruno Braga Fiaschetti and philosopher Eduardo Moraes de Carvalho. The authors drew on existing studies, such as reports by Instituto Locomotiva, LCA Consultores commissioned by Instituto Brasileiro de Jogo Responsável, and a study by Yield Sec.
The study finds that Law 14.790 of 2023 has not been able to move most of the demand to the platforms licensed by the Secretariat of Prizes and Betting (SPA) of the Ministry of Finance.
Regulatory Costs and Structural Incentives
According to the authors, the regulatory structure is a key determinant of market dynamics. The licensed operators face a series of financial and operational burdens, such as licensing costs, a 12% tax on Gross Gaming Revenue (GGR) scheduled to increase to 15% by 2028, anti-money laundering regulations, facial recognition identity verification systems, deposit limits, advertising restrictions, and bans based on specific profiles of bettors.
The authors write: “If the regulatory structure increases the cost of legal operation (compliance, taxes, technology, and commercial restrictions) above the expected cost of illegal operation (including the realistic expectation of enforcement and punishment), an institutional incentive for illegal activity is created, moving supply and demand to unregulated markets, or maintaining them at a significant level.”
Although the authors recognize that these measures are necessary for consumer protection, they highlight that the cumulative cost impact on licensed operators is substantial.
Competitive Advantages of Illegal Platforms
Illegal operators are exempt from paying these regulatory costs. Consequently, they have the competitive edge of offering more favorable odds, more aggressive promotions, easier registration processes, and a wider range of payment options.
“This regulatory imbalance has a direct economic counterpart that is channeled back to sports bettors in the form of more favorable odds, more aggressive promotions, easier registration, and more payment options”, the study explains.
Moreover, illegal operators are not bound by regulation compliance and tend to employ tactics that give the appearance of operating within the regulated environment.
Consumer Confusion and Tax Losses
Studies mentioned in the study reveal that 78% of 2,000 sports bettors polled had trouble distinguishing between legal and illegal operators. This figure is higher for women, at 84%. Instituto Locomotiva data reveals that 61% of sports bettors placed at least one illegal bet in 2025. This increases to 69% for people aged 18 to 29.
The study also reveals that the loss of tax revenue is substantial. LCA estimates that the loss of uncollected taxes from the irregular market is between R$7.2 billion and R$10 billion per year. The study explains that fighting illegal operators could result in substantial revenue gains for the Brazilian state.
The authors go on to explain a feedback loop in the industry: “What appears, therefore, is a self-reinforcing circuit. The regulation increases the costs of the legal operator; the illegal operator exploits the difference with a competitive margin; the bettor, unable to distinguish between the two circuits, is drawn by the more favorable terms of the irregular market; the funds diverted to the illegal market decrease the tax base and economic yield of the regulated regime; the reduction of funds presses the State to increase taxation or demands on the legal operator—which, in turn, increases the differential and the illegal market.”
Historical Roots of Gambling Contradictions
The research paper also delves into the historical connection between Brazil and gambling, citing the “jogo do bicho”, established in 1892 by João Batista Viana Drummond as a marketing tool for the Rio de Janeiro Zoo.
In the 1930s, during the presidency of Getúlio Vargas, gambling was completely legalized, and Brazil boasted more than 70 casinos, which provided jobs for 60,000 people. Famous casinos like Casino da Urca and the Copacabana Palace casino were visited by international stars like Frank Sinatra and Albert Einstein.
However, in 1946, President Eurico Gaspar Dutra prohibited all forms of gambling across the entire country, claiming that gambling was a consequence of abuses that were damaging to morality and public decency. The ban did not eradicate the problem but rather forced it to go underground, as the study believes happens to this day.
The report ends with the observation that the historical conflict between regulation and prohibition shows that “the underlying question has never been, in fact, moral or religious, but rather state control over an economically profitable activity.”
Source: BNL Data
