The legalization of fixed-odds betting in Brazil, established by Law No. 14.790/23, was a historic milestone. Its clear and commendable goal is to bring into legality a sector that, according to the Central Bank, was already moving tens of billions of reais monthly, while also protecting consumers, ensuring sports integrity, and generating state revenue.
However, the adopted tax model raises concerns: a heavy tax burden may have the opposite effect, reducing the competitiveness of the regulated market and, paradoxically, strengthening the illegal environment it aims to combat.
Brazil’s model imposes a 12% tax on GGR—the gross revenue of operators after prize payouts—plus standard corporate taxes (PIS/Cofins, ISS, etc.), which, according to LCA Consultoria, bring the total effective tax burden to about 27% of GGR. Additionally, players are taxed 15% on their net annual winnings.
Revenue from the 12% GGR tax is earmarked for social purposes. The Ministry of Finance’s first semiannual report on the regulated market in 2025 details this allocation: of the R$2.14 billion (US$400m) collected, most was directed to Sports (R$767 million-US$143m), Tourism (R$601 million-US$112m), Public Safety (R$290 million- US$54m), Social Security (R$216 million - US$40m), and Education (R$216 million - US$40m).
These figures demonstrate the enormous social potential of the revenue, but they rely on the premise that companies operate legally. If taxes make legal operations unviable, this revenue simply disappears, as the illegal market contributes nothing.
There is also the risk of further tax increases under Provisional Measure No. 1,303/2025, which raises the GGR rate from 12% to 18%. The success of regulation is measured by its “channeling rate,” the proportion of bettors who migrate from illegal to legal platforms. International experience, highlighted in LCA’s study, offers key lessons.
In the UK, considered a successful model, the channeling rate reaches 95%, with a GGR tax of 21%, a competitive level that allows legal operators to offer attractive products.
By contrast, France and Germany adopted more restrictive models with higher taxes (55% and 48%, respectively), resulting in lower channeling rates (60% and 63%), meaning nearly 40% of bettors remained in the unregulated market, without protection or tax contribution.
Brazil, with an effective GGR tax of 27% (potentially 33%), faces a risky scenario. While the rate may not seem high at first glance, it is enough to squeeze operator margins and directly affect the quality of offerings to players. Other cost factors, such as taxes on foreign services (up to 45%) and corporate income tax, further amplify the burden.
The risk is real. The “Incidence of Illegal Betting in Brazil” study by Instituto Locomotiva paints a worrying picture for 2025: 78% of bettors admit it is difficult to distinguish legal from illegal platforms, 46% have deposited money on sites later discovered to be fraudulent, over 61% placed at least one illegal bet, and 73% bet on at least one major illegal operator.
These data show that the illegal market is not a niche but a dominant competitor. Ignoring this reality when setting tax policy is a strategic mistake that could cost billions in revenue and leave millions of consumers unprotected.
Regulation is the only path to a safe, socially beneficial betting market. However, success depends on delicate balance. Excessive taxation creates insurmountable barriers for compliant operators, forcing them to offer lower-quality prizes, which in practice drives consumers toward illegal options.
Brazil has the opportunity to build one of the most promising regulated markets in the world, ensuring continuous revenue for essential sectors. Sustainable revenue will come not from high taxes on a small, stifled legal market, but from reasonable taxes on a large, vibrant, and attractive legal market capable of effectively channeling the vast majority of bettors.
Otherwise, the big winner will be the illegal market, and the losers will be consumers, the legal market, and the state itself.
Fellipe Fraga
Business Director at EstrelaBet
