New dawn for betting in Brazil, but how did the industry begin?

Tom Waterhouse of Waterhouse VC analyzes the evolution of betting in Brazil and the rise of various gambling verticals. How did this market mature into a multi-billion dollar opportunity?

The landmark date of January 1 heralded a transformative era for betting in Brazil. After years of existing within a gray market dominated by unlicensed offshore operators and loosely regulated local businesses, Brazil has introduced a transparent regulatory framework with a strict zero-tolerance policy against unauthorized betting activities.

This transition is far more than a routine policy update; Brazil is on track to emerge as one of the world’s largest regulated betting economies, with forecasts predicting a revenue surge to $6.3 billion by 2038.

For operators, this formalization is both a vast opportunity and a competitive landscape. For suppliers, it opens avenues for innovation and strategic partnerships as they strive to differentiate themselves in a crowded market.

For Brazil itself, this marks a long-awaited opportunity to reclaim billions in tax revenues. If executed correctly, the benefits could be monumental.

In this article, we will explore the historical developments that have influenced Brazilian betting and the regulatory, technological, and cultural landscapes that will shape its future.

From Casinos to the Streets: The Emergence of Jogo do Bicho

For more than eighty years, Brazil’s betting environment operated largely underground. A pivotal moment occurred in 1946 when President Eurico Gaspar Dutra, reportedly influenced by his religious spouse, outlawed casinos.

Former glamorous venues such as Cassino da Urca and Copacabana Palace were repurposed, closing the curtain on prosperous entertainment hubs.

However, history demonstrates that prohibition does not extinguish demand—it drives it underground. International cruise ships featuring onboard casinos became popular alternatives, while *jogo do bicho* (game of the animal) emerged as the unofficial national lottery.

Initially introduced in 1892 to generate revenue for the Rio de Janeiro zoo, *jogo do bicho* was banned three years later but continued to thrive for over a century, operating as a shadow economy intertwined with football, gang culture, and carnival festivities.

Simultaneously, card games, particularly poker—which is classified as a game of skill—have been integral to Latin American culture, flourishing in both online and traditional formats.

The COVID-19 pandemic acted as a catalyst for online poker participation, significantly boosting player numbers. Notably, Flutter’s PokerStars brand has opted to concentrate exclusively on poker in Brazil, presenting an intriguing differentiation in a fiercely competitive landscape. Today, Brazil stands as a global powerhouse in poker, boasting elite professionals competing on the world stage.

In horse racing, while its appeal has waned, it remains a niche with potential for growth. With the introduction of clear regulations, horse racing could experience a revival, especially with the influence of local stars like record-breaking jockey Jorge Ricardo and João “Magic Man” Moreira. Increased local interest, supported by operator partnerships, may reinvigorate this sport.

Jogo Bonito: A Culture of Football Betting

No passion in Brazil rivals that of football, accounting for more than 80% of all betting activity, followed by basketball, esports, and MMA—domains where Brazilians excel.

Historically, street bookies dominated football betting; however, the internet boom of the early 2000s reinvented the betting landscape.

With the surge in mobile usage and the rising prevalence of digital payments, particularly via Pix—the central bank’s instant payment system—online betting became accessible and user-friendly. By 2018, billions flowed untaxed to offshore sportsbooks, underscoring a regulatory void that intensified demands for reform.

Brazil boasts one of the highest percentages of esports bettors in the world, reflecting an evolving betting culture.

The Crypto Revolution in Betting

The legalization of sports betting in Brazil in 2018 under President Michael Temer was marred by a lack of a comprehensive regulatory framework, creating an environment ripe for exploitation.

This coincided with the rapid ascent of cryptocurrencies and crypto-based casinos, positioning Brazil—boasting the highest digital penetration in the Latin American region—as a prime target for offshore operators, many of whom provided limited protections for players.

It wasn’t until December 2023 that decisive regulatory measures came into play, as gambling had become embedded in Brazilian culture, with 39 of the 40 top-tier football clubs sponsored by betting companies.

By 2024, Brazil had evolved into the world’s largest source of traffic for gambling websites, capturing 15% of global visits. Local surveys showed that 68% of Brazilians participated in some form of gambling, while approximately 18%—around 26 million individuals—were engaged with cryptocurrencies.

Nonetheless, Brazil was forgoing billions in potential tax revenue from the thriving online betting market.

Transition from Grey to Green for Betting in Brazil

Brazil intensified its efforts to regulate betting in 2024, implementing bans on credit card usage, cash transactions, and cryptocurrency bets.

However, it was in 2025 that Brazil experienced a monumental shift, under President Lula, officially launching a fully regulated market for sports betting and igaming, enforcing a stringent zero-tolerance policy against unlicensed operators. The regulatory agency has already shut down or blocked over 8,000 illegal sites, although an estimated 16% of offshore activities persist.

While thwarting offshore operators poses challenges, Brazil has significant advantages through Pix. Owned and regulated by the central bank, Pix now manages 96% of transactions, offering instantaneous payment options—an essential asset for wagering.

Unlike jurisdictions with fragmented regulatory oversight, Brazil’s centralized governance enables the Central Bank to enforce direct regulation, hampering illegal operators’ efforts to infiltrate the market.

The Cost of Competition in Brazil’s Gambling Landscape

Nevertheless, the barriers to entry are steep, and competition is fierce. A five-year operating license costs $6 million, limiting participation to well-capitalized firms. New regulations stipulate that companies must be based in Brazil and include at least one local stakeholder owning a minimum of 20% of the company’s capital.

Additionally, platforms must employ facial recognition technology for identity verification and maintain substantial financial reserves. Importantly, systems must exclusively accept Pix payments, favoring domestic operators already acquainted with the platform.

While a 12% Gross Gaming Revenue (GGR) tax presents an attractive proposition, it also escalates competitive pressures. Only licensed operators utilizing a ‘bet.br’ domain can sponsor teams or sporting events, underscoring the necessity of official market entry for brand visibility.

Prominent clubs, including Flamengo, Corinthians, and Palmeiras, have secured sponsorship agreements exceeding BRL100 million annually from operators like Pixbet, Esportes da Sorte, and Sportingbet.

These partnerships are vital, especially given the new regulations that prohibit sign-up bonuses. Reports suggest that football clubs are abandoning lower-paying advertising deals in favor of more lucrative offers, highlighting the imperative for brand exposure in an increasingly competitive environment.

Additionally, there is a 15% withholding tax on players’ net winnings exceeding $547. Brazil’s betting revenues are earmarked for investment in education, tourism, and sports through a lottery-style reinvestment mechanism.

Who Wins in Brazil’s Evolving Betting Market?

The success of betting in Brazil is likely to be confined to a select group, as the high costs associated with customer acquisition and retention intensify competition. The strategic $356 million partial acquisition of NSX, owner of Betnacional, by Flutter—accompanied by a 10-year option for acquiring the remaining 44%—illustrates the substantial financial commitment required and the strategic advantage of establishing partnerships with strong local entities.

Flutter’s projection of a $90 million-$100 million loss in 2025 due to aggressive customer acquisition strategies exemplifies the reality: only well-capitalized operators with the right alliances and execution strategies will endure.

This acquisition underscores what it takes to succeed in Brazil: deep local integration (as demonstrated by Betnacional’s focus on Brazilian users), a robust brand identity (marketed as “Aposta dos Brasileiros”—The Bet of Brazilians), and high-impact localized marketing through celebrity endorsements and major media partnerships, including sponsorship of Big Brother Brazil.

Establishing such a strong market presence incurs significant investment, and while some local brands may scale back their plans, enduring success will be reserved for those who can genuinely differentiate themselves.

Winning in Brazil demands more than financial backing; a profound understanding of the local culture, including marketing strategies, communication styles, bet types, and promotions, is essential. This explains the escalating demand for local talent, who possess insight into what Brazilian bettors desire.

Ultimately, escalating costs will lead to industry consolidation, amplifying expectations for increased mergers and acquisitions. Capturing an early competitive advantage may render local valuations initially appealing, yet inherent risks abound—as Brazil’s regulatory framework remains nascent, tightening rules and constraints could emerge.

Surge in Supplier Opportunities

Apart from traditional sports, esports are experiencing unprecedented growth—so much so that Portuguese has emerged as the second most-watched language on Twitch. This surge reflects broader opportunities for suppliers and reinforces our investment focus, as demand for specialized betting markets, data analytics, and localized technologies continues to escalate.

Brazil is uniquely positioned to allow operators to offer a comprehensive suite of wagering products, from casino gaming to in-play betting, rendering it a compelling market for suppliers. As operators strive to set themselves apart in terms of offerings, suppliers providing tailored solutions to Brazilian operators stand to gain significantly, largely insulated from the pressures of competition and regulation.