Betting on the Economy: Gambling Industry in Brazil
By Pedro Meerbaum, Sciences Po—Menton
In November 2024, the Copa Libertadores de América (COMBAL), the premier South American club tournament, came to an end, giving a historic and much-celebrated win to the Rio-based club of Botafogo. Devoted fans of the club flooded the streets of Brazil, from South to North, commemorating and reveling in what was perceived as a national victory. In its winning photograph, the team and coaches are gathered together for a buoyant picture, proudly displaying their medals and pointing to the shining monumental trophy. On the champions’ chests, behind the golden medals but nonetheless visible to the public, is a logo: PariMatch.
The Ukrainian-born and Cypriot-based company is one of the primary vehicles for sports betting. The frivolous image of the winning team with PariMatch's logo repeated on every athlete's shirt became emblematic of one of Brazil's most pressing issues: online gambling. The gambling industry, previously seen as an alternative source of public funding, is now a parasite that diverts money circulating in the Brazilian market to foreign companies, characterized by lackluster regulation and a long-lasting social crater.
Gambling in Brazil has had a fluctuating legal history. Casinos and formalized means of gambling became illegal in 1946 under the administration of former president Gaspar Dutra. Led by his religiosity and under the guise of Christian values, he deemed the gambling houses “harmful to morals and good customs.” In the 1990s, as bingo games gained traction and became an alternative form of gambling targeted at vulnerable and easily addicted elders, a new legal discussion arose. This eccentric form of gambling was rendered illegal by President Lula's first term in 2003, turning bingo back into a mundane, non-commercial activity. Gambling also manifested itself in non-formalized markets, illegally yet extremely popular nationwide. Most famously, the “Jogo do Bicho,” or Animal's Game (in direct translation), endured as a lottery-style game, typically carried out by organized crime and easily accessible to the population. The game permeated Brazilian collective memory as a long-standing institution and helped cultivate an existing gambling culture.
In December of 2018, a month before Bolsonaro would set his government in Brasília, Michel Temer, then President of Brazil, approved a law that broke the paradigms of gambling in Brazil. Temer's government legalized sports betting, intending to raise funds for a new ministry that tackles public security. Arguably, if betting already existed and mobilized funds illegally throughout the country, then it would only make sense to legalize and formalize these processes and allocate the funds in a much-needed security measurement. Victim of bad timing, the legal process of legalising such bets fell to the bottom of the list of priorities within the transitioning process to Bolsonaro's government. With de-facto legalization but little regulation, betting industries grew in Brazil to the disadvantage of the national economy, creating a now strongly established social havoc.
The budget projection for this audacious plan is predicted to raise around 250 million reais for public security, a number that, when divided throughout the whole of Brazil, would bring about insignificant change. Just the state of São Paulo required 8 billion reais to carry out efficient security measures. Even so, projections fell short. With the lack of regulation and control of this new legalization, a breach was opened for foreign betting companies to settle and grow an extensive market in Brazil without taxation.
If in the past the physicality of gambling curbed, to some extent, the ability of one to bet (as in one had to get to a casino, through taxi or driver, and had to be in that locality to gamble), its digitalization has turned into a relentless threat. The most famous vehicle in Brazil for which betting occurs is an online app called Fortune Tiger (known as Jogo do Tigrinho - Little Tiger). The game of chance, inspired by the Chinese zodiac, is a roulette-style application similar to a slot machine. The game is led by Maltese organisation PGSoft, a company that specializes in making mobile games, an organization of which possesses no formal registry in Brazil. Fortune Tiger gained traction as the company contacted digital influencers and paid for them to promote their game online. The influencer, through social media, sells the app as a way of “quickly making a lot of money,” usually playing a round for their audience and receiving double their input. The fees offered by PG Soft to such influencers are captivating, fluctuating according to the number of followers a given celebrity might have. The offers can reach from 100 thousand reais up to 50 million, allegedly giving the celebrities a short time to decide (usually up to a day).
According to research by the Federal Senate of Brazil on endowment and gambling, 80% of Brazilian citizens believe their economic situation did not improve in 2024. This same research shows that 28% of the population engaged in any form of sports betting or gambling, and 32% of Brazilians claim to have outstanding debts (Graph below). From those who gambled, 39% spent more than 500 reais gambling, a value worth almost half of the minimum wage in Brazil.
The research's scope was limited to a sampling size of 100 thousand people, which has a large margin of error when putting it to analysis of the 216 million habitants in Brazil. Yet, it is evident that the number of people engaging in online gambling is significant, and increasing, and satisfaction with personal finances is at concerning levels. It can be expected, with the continuation of betting and the further ingrained gambling addiction in Brazilian society, for the number of endowments and individual debt to reach concerning heights by the end of 2025.
Online betting can be understood as a negative externality—a product or service that, when consumed, exerts a negative effect on a third party. The negative effect, in this case, is the creation of an addiction and the high risks of personal debt that online betting creates. When gambling was originally legalized, the expectation was that, despite the obvious negative externality, the high level of money circulated by these casino-like institutions would become a profitable alternative source of income for a state that sought to improve its welfare. Such money did not circulate back into the state's reserves, and it was lost to little to no taxation, landing in fiscal paradises and foreign companies. What was left to the ever-developing state of Brazil was an endowed population with no funds to justify the legalization.
Recently, President Lula ratified a law that would put more restrictions on these bets. The proposal includes criteria on norms, inspection, and a 15% taxation of income that is to be reallocated to education, sport, healthcare, tourism, and public security departments. The new set of regulations works mostly to avoid money laundering through sports betting via inspection. Little is directly tackled regarding the legality of the foreign organizations in Brazil, and the new legislation falls short with its inspection once the gambling organizations are not based in Brazil, have no official registry in the country, and have consistently escaped any legal issues posed in Brazilian territory.
As gambling permeates the fabric of Brazilian society and weakens economic institutions, policymakers fall short in dealing with the issue, and allows for a complex criminal network to develop rapidly. The challenge for the Brazilian state going forward is to look beyond taxation as a form of profiting off an already existing social phenomenon. It requires much stricter regulation on the presence of foreign companies in Brazilian grounds, a reconsideration of the legalization of gambling in the country in its totality, and feasible social efforts to combat gambling addiction and financial illiteracy.
Cover Photo courtesy of Ted Murphy on Flickr.
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