The federal government published, in June 2025, Provisional Measure 1,303 of 2025, which introduced several tax changes in Brazil. Among these changes, the PM modifies Law 13,756 of 2018 to increase the gaming tax from 12% to 18% on GGR (Gross Gaming Revenue — that is, total bets minus prizes) for fixed-odds betting. But what does this increase mean in practice for the online betting sector?
Throughout recent history, countries that have opted for excessive tax increases on online betting activities have often faced counterproductive effects: expansion of the illegal market, reduction in legal protections for bettors, and, paradoxically, a drop in tax revenue.
This is an empirical lesson often ignored by policymakers, but it deserves special attention when structuring a still-nascent sector such as online betting in Brazil.
According to a study by Copenhagen Economics, commissioned by the Swedish government to regulate online betting, excessive taxation on operators leads to fewer bettors being channeled into the legal market. The study's main conclusions were:
* Tax rates between 15% and 20% are ideal, as they can achieve both high channeling and significant tax collection;
* Rates above 20% tend to result in lower channeling and reduced tax revenue because licensed betting operators become less competitive, leading consumers to choose operators outside the system (i.e., the illegal market).
Germany's experience is a clear example of these conclusions. By instituting a 5.3% tax on turnover (the total amount bet, without deducting prizes), the country severely discouraged the regulated market. Due to the high tax burden, licensed operators began offering less competitive odds and reduced prizes, becoming less attractive compared to unauthorized platforms.
The result was immediate: the channeling rate in Germany's online gaming segment is estimated to range from 20% to 40%. In other words, despite active regulation, 60% to 80% of bets in Germany still occur outside the licensed system.
In Brazil, the PM signals a similar tortuous path. By increasing the gaming tax on fixed-odds betting from 12% to 18% on GGR, the government is replicating a short-term revenue-driven logic already proven misguided.
Operators already face a heavy tax burden: gaming tax, Corporate Income Tax (IRPJ), Social Contribution on Net Profit (CSLL), PIS, Cofins, and ISS, as well as a R$30 million (US$5.4m) license fee and a monthly regulatory fee — leading to a total burden exceeding 50%, not including the selective tax expected to be introduced with tax reform.
Moreover, a significant portion of the remaining revenue is allocated to essential third parties — such as platform providers, game providers, aggregators, and sportsbooks. Thus, the amount effectively retained by the operator is substantially reduced, making the operation increasingly financially unviable.
This abrupt tax increase compromises the attractiveness of the formal market, discourages new entrants, reduces the competitiveness of licensed operators, and pushes consumers toward illegal platforms — which, free from regulatory or tax obligations, can offer more financially advantageous products from the bettor's perspective.
In terms of public policy, a fundamental principle is being ignored: taxing more does not necessarily mean collecting more.
In this scenario of high taxation, legal uncertainty, and elevated operational costs, the illegal market grows unchecked. It is estimated that it already accounts for about 50% of the national market — a trend likely to worsen with the new PM.
The lack of effective oversight creates fertile ground for impunity, allowing clandestine operators to act with broad freedom: offering higher odds, aggressive bonuses, intense advertising, and no commitment to regulatory standards, tax obligations, or responsible gambling principles. By stifling those who follow the rules, the Executive Branch inadvertently strengthens those operating on the margins of legality.
This distortion results in several negative externalities. With thinner margins, licensed operators cut back on investments in marketing and sports sponsorship, currently a vital revenue source for clubs and federations. The creation of direct and indirect jobs is also compromised, affecting the entire sector's production chain: software developers, tech companies, consultants, and service providers in general.
In the end, the biggest loser is the consumer, who loses access to a safe, transparent, and regulated environment for placing bets.
If the tax hike discourages regulated operations and further reduces Brazil's channeling rate, the outcome will be far lower tax revenue than projected.
The federal government’s ambition to raise funds — both through fees and taxes on the activity — may ultimately be frustrated. In other words, by trying to extract more from a sector still in its infancy, the state risks strengthening the clandestine market and losing sight of the fundamental goals of regulation.
Udo Seckelmann
Lawyer and Head of the Betting and Crypto Department at Bichara e Motta Advogados, professor at the CBF Academy, and Master of International Sports Law from the Instituto Superior de Derecho y Economía in Madrid, Spain.
Pedro Heitor de Araújo
Law student at PUC-RJ, working in the crypto & gambling sectors at Bichara e Motta Advogados since 2022. As an analyst, researcher, and enthusiast, he focuses on the legal dynamics of crypto asset regulation, DeFi (decentralized finance), betting, and gaming. He has completed courses in DeFi and non-fungible tokens (NFTs) at the University of Nicosia (Cyprus).
