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Brazil’s betting market is growing fast, but a new tax proposal has created fresh tension between regulators, operators and an illegal market that refuses to shrink.
Brazil’s regulated betting industry entered 2025 with momentum. New companies were joining the market, players were shifting to licensed platforms, and confidence was rising that the country could build a long-term, stable system.
But behind that growth, another story has been unfolding. Tax pressure is building, political debate is heating up, and the shadow of a large illegal market remains.
The Brazilian Institute of Responsible Gaming (IBJR) has stepped back into that debate, repeating a warning it has raised before: if tax rates climb too high, the formal market may struggle to hold its ground.
A growing market now faces a higher tax proposal
Operators entering the regulated system already start with a heavy cost base.
Under Brazil’s current rules, a company must pay BR30m to gain authorisation. After that, the consumption-based model applies a 12 per cent GGR tax, followed by other national taxes and social security contributions. Together, these create an effective load close to 25 per cent.
Lawmakers now want to raise the main rate to 24 per cent under PL 5.473/2025.
If adopted, the IBJR says the combined impact would lift the overall tax burden by 45.4 per cent, creating conditions that may push operators to reconsider their long-term strategy in Brazil. The concern is not only the higher cost, but the timing, as the market is still in its first year of regulation.
Illegal betting continues to capture a large share
The IBJR says the informal market still holds most online activity despite regulation.
More than 51 per cent of online betting in Brazil still flows through unlicensed operators. These companies face no tax, no compliance requirements and no oversight. The IBJR estimates that the illegal sector now moves around BR38bn a year. IBJR warned that rising tax pressure could shift more activity to unlicensed websites, a concern already reflected in recent analysis of Brazil’s latest betting tax debate, where policymakers are considering further increases.
The institute also cites losses of BR10.8bn in public revenue caused by unlicensed activity.
Its argument is that the regulated market cannot compete fairly if the cost gap widens further. Higher taxes may create the very outcome lawmakers want to avoid by making offshore platforms more attractive for both operators and players.
IBJR points to one scenario as an example. If the illegal market’s share fell by only five percentage points, Brazil could generate BR1.1bn a year in extra revenue. That figure is higher than the projected benefit of doubling the GGR tax.
A wider policy challenge emerges
The future of public funding and consumer protection depends on keeping operators in the regulated system.
Brazil’s regulated betting market helps fund sport, tourism, education, security and social programmes. Those contributions depend on companies staying licensed and active.
The IBJR argues that if costs rise too quickly, operators may reduce investment, limit products or shift activity outside the formal system. If that happens, oversight weakens, and consumers face more risk from fraud, unsafe platforms and limited support.
The institute continues to push for a tax structure that encourages channelisation rather than discouraging it. The tension between fiscal goals, political pressure and market reality remains at the centre of Brazil’s regulatory debate.
As Congress prepares to discuss the new rate, the industry is watching closely. The next decision could shape the balance between regulated and illegal betting for years ahead.
Source: Focus Gaming News
