Why is Pix central to combating the illegal betting market?
There's a recurring question when we talk about the betting market in Brazil today: why, even with regulation, does illegal activity continue to operate? The answer is simple and, at the same time, uncomfortable. Because we haven't yet tackled the problem in the most efficient way.
For a long time, the fight against the illegal betting market has focused on blocking websites. It's an important effort, but insufficient. The dynamic is well-known: one domain is blocked today, another appears tomorrow, with slight variations. It's an almost endless task, which the market itself often describes as "trying to bail water with a sieve."
If we want to be truly effective, we need to change our approach. The path is different: follow the money. And it is precisely at this point that Brazil has a huge competitive advantage: Pix.
Today, only Pix is accepted as a payment method in the betting market in the country. In other words, for the first time, we have an instrument that allows us to see and, above all, interrupt the financial flow that sustains these operations. When you cut off the payment, you cut off the business.
This movement has already begun to happen. The Prizes and Betting Secretariat has acquired stricter instruments to act against institutions that operate illegally, with fines that can reach extremely significant amounts. At the same time, the Central Bank has significantly raised the level of requirements for payment institutions.
This second point is crucial. In recent years, we have seen a proliferation of smaller institutions, often with low levels of oversight. With increasing capital requirements, compliance measures, and anti-money laundering measures, many of these structures have ceased operations.
In practice, this has already reduced the space for illegal activity. But it's still not enough. The irregular market still represents a significant share: illegal betting currently accounts for between 41% and 51% of the Brazilian "betting" market, according to a survey by the Locomotiva Institute and LCA Economic Consulting.
In other words, we are talking about a huge volume of resources that fail to generate taxes, jobs, and consumer protection, a loss that could reach up to R$ 40 billion per year in revenue, according to the same estimate from the sector.
And here's an important point: it makes no sense to discuss increased tax burdens or additional restrictions for those in the regulated market while this segment continues to operate outside the law.
If we tighten the screws on those already operating within the system, the effect is direct: it pushes the operator, and often the user themselves, out of the market. The most efficient way to increase revenue is not by raising taxes. It's by bringing the illegal into the legal system. If we do that, the regulated market practically doubles in size, and along with it, the taxes collected also double. Therefore, the focus needs to be clear: enforcement.
We need to monitor payment methods, monitor providers, and monitor those operating on both sides. It's no longer acceptable to have companies "sitting on the fence," serving both the regulated and illegal markets simultaneously.
Another area that needs improvement is the integration between regulators. The Central Bank and the Prizes and Betting Secretariat need to work more closely together. Combating illegal gambling depends directly on this coordination.
Brazil has built, in a short time, a solid regulatory model for betting. The market is functioning, generating revenue, creating jobs, and offering more protection to the user. Now, we are entering a new phase: consolidation. And, at this stage, there is no doubt about where we should concentrate our efforts. The fight against the illegal market will not happen on the surface, by taking down websites. It will happen in the financial flow. Pix gives us this possibility. Perhaps it is the most powerful tool we have today. The question is not whether it can help. The question is how much we are willing to use it effectively.
(*) Leonardo Baptista holds a degree in Computer Science from Faculdade Associadas de São Paulo (FASP) and a Bachelor's degree in Marketing Management from Universidade Anhembi Morumbi. He is the CEO and Co-founder of Pay4Fun , the first payment institution operating in the sports betting sector to receive authorization from the Central Bank of Brazil. The entrepreneur has over 20 years of experience in the gaming and information technology industry: in 2004 he created the first online bingo game, an operation already permitted in Brazil at the time. In 2022, Leonardo was included in the CIO Business Review's list of the ten most inspiring CEOs, which selects the most influential executives in the business world.
