Illegal Betting Still Represents a Major Share of Brazil's Online Market Despite Regulation

Brazil's efforts to regulate online betting have significantly reshaped the country's gambling sector, but a substantial portion of betting activity continues to take place outside the licensed market. New research indicates that illegal platforms accounted for between 38% and 44% of online betting activity during the first half of 2026, highlighting the scale of the challenge facing Brazilian authorities.

The latest estimate represents an improvement compared with the previous assessment, which placed the illegal market's share between 41% and 51% in 2025. Nevertheless, the figures indicate that unlicensed operators continue to capture a sizeable portion of Brazilian betting activity more than a year after the country's regulated framework came into force.

The research was based on a nationwide survey of 2,291 bettors conducted in May 2026, combined with an assessment of the wider betting market. The findings suggest that the introduction of a formal licensing system has reduced the relative size of the illegal sector, but has not eliminated consumer access to offshore and otherwise unauthorised platforms.

The persistence of the illegal market creates a significant challenge for Brazil's regulatory strategy. The country's licensing framework was designed not only to bring betting operators into a supervised environment but also to protect consumers, strengthen financial controls, increase tax collection and prevent operators without authorisation from continuing to target Brazilian customers.

The continued scale of illegal betting suggests that those objectives remain only partially achieved.

One of the main concerns is that consumers can still access unlicensed websites relatively easily. The research identified several behaviours that indicate continued use of platforms outside the regulated framework. More than half of surveyed bettors said they had used websites that did not require facial recognition, while almost half reported using betting sites with domains other than the regulated .bet.br format.

Payment behaviour provides another indication of the challenge. A significant proportion of bettors reported using payment methods that are prohibited within Brazil's regulated betting system. Credit cards and cryptocurrencies were among the methods identified in the survey, demonstrating that consumers can still find alternative ways to fund accounts with operators that fall outside the domestic regulatory structure.

These practices create difficulties for regulators because payment controls are one of the main mechanisms through which authorities seek to distinguish licensed operators from illegal businesses.

Brazil has introduced a range of measures designed to make the regulated environment more difficult to circumvent. Authorities have blocked tens of thousands of unauthorised betting websites and have sought greater control over payment channels used by illegal operators.

More than 60,000 illegal websites have reportedly been blocked since the regulatory framework was introduced, demonstrating the scale of enforcement activity undertaken by the government.

However, blocking websites does not necessarily eliminate the underlying demand. Unlicensed operators can attempt to establish replacement domains, redirect customers to alternative websites or use other technological methods to maintain access.

This creates an ongoing enforcement problem in which regulators must continually identify and restrict new websites rather than dealing with a fixed list of illegal operators.

The challenge is compounded by the international nature of online gambling. An offshore operator can be based in one jurisdiction, use payment services from another country and market its products to Brazilian customers without maintaining a conventional physical presence in Brazil.

The regulated system is therefore dependent on cooperation between domestic authorities, payment providers, internet companies and international regulators.

The financial consequences of the illegal market are also significant.

Licensed operators are subject to Brazilian taxation and regulatory fees, while unauthorised businesses can potentially avoid the same obligations. As a result, betting activity that remains outside the regulated market represents not only a consumer-protection issue but also a potential loss of tax revenue for the government.

The financial importance of the regulated sector has grown rapidly since the market opened. Gross gaming revenue from regulated fixed-odds betting reached approximately R$20.07 billion during the first half of 2026, representing a 15.3% increase compared with the same period of the previous year.

The contrast between the growing regulated sector and the continuing presence of illegal operators illustrates the complexity of Brazil's market. The government has succeeded in establishing a substantial licensed industry, but a significant portion of consumer activity remains outside that framework.

The reasons consumers continue to use illegal platforms are likely to vary.

Some may be attracted by operators offering products or betting markets that are unavailable under Brazilian regulation. Others may respond to promotional offers, payment methods, higher betting limits or the perception that offshore platforms provide greater flexibility.

The absence of facial recognition and other onboarding requirements may also make illegal websites more attractive to consumers seeking a simpler registration process.

These advantages, however, come with significantly greater risks.

Customers using unauthorised platforms may have fewer protections if an operator refuses to pay winnings, mishandles personal information or becomes inaccessible. They may also have limited recourse if their accounts are closed or their funds are lost.

Licensed operators, by contrast, operate within a framework that imposes requirements relating to customer identification, responsible gambling, financial transactions and consumer protection.

The continued popularity of illegal platforms therefore presents authorities with a difficult policy question: how to make the regulated market sufficiently attractive and accessible while ensuring that enforcement remains strong enough to prevent unauthorised businesses from competing on the basis of weaker regulatory obligations.

The issue has also become increasingly important from an AML perspective.

Illegal betting platforms can operate outside the customer-identification, transaction-monitoring and reporting requirements imposed on licensed operators. This can create opportunities for criminal actors to use gambling accounts and payment channels to move funds without the same level of regulatory scrutiny.

The use of cryptocurrencies and alternative payment systems can further complicate efforts to identify the source and destination of funds.

Brazil's regulated framework has therefore placed considerable emphasis on financial controls. Licensed operators are expected to identify customers, monitor transactions and implement measures designed to detect suspicious activity.

The illegal market does not necessarily provide equivalent safeguards.

The distinction is particularly important as Brazil's betting industry becomes increasingly integrated into the country's financial system. Large amounts of money are now flowing through licensed operators, creating greater incentives for authorities to monitor how funds enter and leave betting platforms.

At the same time, criminals may seek to exploit weaker controls outside the regulated environment.

The government has already demonstrated that it is willing to investigate financial irregularities involving betting businesses. Recent enforcement operations have targeted suspected tax evasion, foreign-exchange violations and money laundering involving companies active in the Brazilian betting market. In one recent investigation, authorities alleged that a betting group had moved more than R$5 billion during 2025 and initiated proceedings that could result in substantial tax recovery.

Such investigations demonstrate that regulatory status alone does not remove financial-crime risks. Licensed businesses remain subject to scrutiny, while illegal operators present an additional layer of risk because they operate outside the formal compliance framework.

The continuing scale of the illegal market may also influence future regulatory policy.

Brazilian lawmakers and government officials have increasingly debated whether the existing rules are sufficiently effective. Issues such as advertising, consumer protection, taxation, responsible gambling and access to online casino products have all attracted political attention.

Authorities may consequently seek further measures to make illegal operators less attractive and more difficult to access.

One possible approach is greater cooperation with financial institutions and payment providers. Preventing unauthorised operators from receiving deposits or making payouts can be more effective than simply blocking websites because it targets the financial infrastructure that allows the businesses to operate.

Brazil has already placed restrictions on certain payment methods within the regulated market. Continued enforcement against payment intermediaries serving illegal operators could become an increasingly important part of the government's strategy.

Advertising is another potential area of focus.

Illegal operators can potentially compete for customers without being subject to the same advertising restrictions as licensed businesses. If consumers are repeatedly exposed to offshore brands through social media, websites, affiliates or other marketing channels, website blocking alone may have limited impact.

Authorities may therefore need to address the wider ecosystem that connects illegal operators with Brazilian consumers.

The role of affiliates and digital marketing networks could become particularly important. Online betting businesses can reach consumers through influencers, comparison websites, promotional platforms and other intermediaries. Ensuring that marketing partners do not promote unauthorised operators is likely to become an increasingly important enforcement objective.

The size of the remaining illegal market also creates a challenge for licensed operators.

Companies that have invested heavily in obtaining Brazilian licences, complying with local requirements and paying taxes may face competition from businesses that do not carry equivalent regulatory costs.

This can create an uneven competitive environment.

Licensed operators must absorb taxation, licensing expenses, responsible-gambling requirements, compliance costs and technical obligations. Offshore operators may be able to offer customers more aggressive promotions or lower-cost products because they do not face the same obligations.

This makes enforcement important not only from a regulatory perspective but also for the commercial sustainability of Brazil's licensed market.

The reduction from an estimated 41%-51% illegal market share in 2025 to 38%-44% in the first half of 2026 nevertheless indicates that government measures may be having an effect.

The direction of travel is therefore positive, even though the remaining share is still substantial.

The challenge will be maintaining that reduction as the regulated market matures.

Brazil's authorities are likely to continue refining their approach, particularly as they gain more information about consumer behaviour and the methods used by illegal operators to circumvent enforcement.

The research also highlights the importance of consumer education.

Some bettors may not fully understand the difference between a licensed Brazilian operator and an offshore platform. Clear information about licensing, consumer protection and the risks associated with unauthorised operators could help shift demand towards regulated businesses.

The introduction of the .bet.br domain provides consumers with one straightforward indicator of regulated status, although consumers may still encounter websites that attempt to imitate legitimate operators or use alternative domains.

Regulators therefore need to ensure that consumers can easily verify whether a betting company is authorised to operate in Brazil.

The continuing presence of illegal betting also means that the success of Brazil's regulatory system cannot be measured solely by the number of licences issued or the tax revenue generated by licensed operators.

The effectiveness of the framework will ultimately depend on how much of the country's betting activity takes place within the regulated environment.

The latest figures suggest that considerable progress has been made, but that the transition is far from complete.

For financial institutions and compliance professionals, the findings provide an important reminder that the risks associated with online betting extend beyond licensed operators. Illegal platforms can create exposure through payments, affiliates, financial intermediaries and customers who move between regulated and unregulated businesses.

Monitoring unusual payment patterns and identifying links to unauthorised gambling businesses can therefore form an important component of broader financial-crime controls.

For licensed operators, the figures reinforce the need to distinguish their services clearly from those offered by illegal competitors. Strong responsible-gambling measures, reliable customer support, secure payment systems and transparent licensing information can become important competitive advantages as consumers become more aware of the risks associated with offshore platforms.

Brazil has made substantial progress in creating a regulated online betting industry, but the latest evidence shows that regulation has not yet displaced the illegal market.

With between 38% and 44% of online betting activity estimated to remain outside the licensed sector during the first half of 2026, authorities face a continuing battle to move consumers, payments and operators into the regulated environment.

The decline from the previous year's estimate is encouraging, but the remaining share is large enough to represent a significant regulatory, financial and consumer-protection challenge.

The next stage of Brazil's betting policy is therefore likely to focus not simply on expanding the licensed market, but on making the illegal market progressively harder to access, finance and operate. The effectiveness of those measures will determine whether the gap between Brazil's regulated and unregulated betting sectors continues to narrow.

By fLEXI tEAM