Brazil’s Betting Boom Faces Mounting Pressure as Tax Reform Threatens Legal Market Stability

Brazil’s regulated fixed-odds betting market has entered its second year with strong momentum, building on the solid foundation established in 2025. The sector now boasts 83 licensed operators, approximately 29.4 million active users, and an impressive R$37 billion directed into public revenues. Despite these encouraging figures, fresh analysis has introduced a note of caution regarding the market’s long-term sustainability.

A new report by LCA Consultoria, commissioned by the Brazilian Institute of Responsible Gaming (IBJR), warns that the country’s ongoing Tax Reform could significantly increase the fiscal burden on licensed operators. According to the study, the effective tax rate is expected to rise from 32% to 42% by 2033, placing growing pressure on a sector that has already made substantial financial commitments, including grants of R$30 million to operate legally.

Within the industry, there is a growing consensus that boosting state revenue should rely primarily on combating illegal gambling rather than placing additional strain on compliant operators. Stakeholders argue that excessive taxation risks undermining the very ecosystem that regulation sought to create.

The LCA study outlines how the restructuring of Brazil’s tax system will disproportionately affect iGaming companies. Specifically, the replacement of existing taxes such as the Social Integration Program (PIS/Cofins) and the Service Tax (ISS) with the new Tax on Goods and Services (IBS) and Contribution on Goods and Services (CBS) is expected to drive the increase. Eric Brasil, director of the consultancy, emphasized that the sector’s tax burden will sit 14 percentage points above the baseline rate of 28% projected by the Ministry of Treasury. Compounding this pressure, social allocation rates are also set to rise from 13% to 15%.

Concerns over the potential consequences are already being voiced by industry leaders. Plínio Lemos Jorge, president of the National Association of Games and Lotteries (ANJL), cautioned that escalating taxes could deter investment and destabilize the market. “If the rules of the game don’t change, it can continue like this, because that’s what the houses that came to Brazil were willing to do,” he explained.

He added a stark warning about the risks of incremental tax increases: “If it starts to always increase by 1% to 2%, soon there will no longer be a viable operation. Because companies arrive in Brazil based on a premise, it would be a breach of trust to change the rules of the game in the middle of the championship”, said the executive.

The debate also highlights the delicate balance between taxation and market competitiveness. André Gelfi, director and co-founder of IBJR, stressed that excessive fiscal pressure on legal operators could unintentionally drive consumers toward unregulated platforms. According to him, transferring higher costs onto betting products would make illegal alternatives more attractive.

At the same time, evidence suggests that targeting the illegal market yields significant fiscal benefits. The study indicates that every 5% increase in market formalization could generate approximately R$1 billion in additional revenue for the government. “The study showed that for every 5 percentage points of market formalization, the country could raise around R$1 billion additionally”, he pointed out.

Another looming concern for operators is the introduction of the Selective Tax—often referred to as a “sin tax”—which is scheduled to come into effect in 2027. Industry stakeholders argue that this measure reflects a misunderstanding of how fixed-odds betting operates compared to traditional state lotteries. Gelfi contends that lawmakers are incorrectly applying the same taxation logic to fundamentally different models, particularly given that state-run lotteries typically retain a much larger share of revenue.

“Due to ignorance, they want to apply the same dynamics with betting”, concluded the director, reinforcing the urgency of protecting the legal ecosystem.

As Brazil’s betting market continues to evolve, the tension between regulatory ambition and economic viability is becoming increasingly evident. While the sector has demonstrated strong growth and significant contributions to public finances, industry leaders warn that without careful calibration of tax policy, the progress achieved so far could be placed at risk.

By fLEXI tEAM