Why is Pix central to combating the illegal betting market?

Published in Poder360, this opinion article by Leo Baptista, founder of Pay4fun,  explores why Pix has become one of the most strategic tools in combating Brazil’s illegal betting market and why financial tracking may be more effective than simply blocking websites.

There is currently a recurring question whenever we talk about the betting market in Brazil: why does the illegal sector continue to operate even after regulation?

The answer is simple and, at the same time, uncomfortable: because we still have not tackled the problem in the most effective way.

For a long time, efforts to combat illegal betting focused on blocking websites.

It is an important measure, but an insufficient one.

The dynamic is familiar: one domain is blocked today, another appears tomorrow with slight variations.

It is an almost endless task, often described by the industry itself as “a losing battle.”

If we truly want to be effective, we need to change the approach.

The path is different: follow the money, and this is precisely where Brazil has an enormous competitive advantage: Pix.

Today, Pix is the only payment method accepted in Brazil’s betting market.

For the first time, this gives authorities an instrument capable not only of tracking, but mainly interrupting, the financial flow that sustains these operations.

When you cut the payment flow, you cut the business itself.

This movement has already begun.

The Secretariat of Prizes and Betting (SPA) now has stronger enforcement tools against institutions operating illegally.

ines can reach extremely significant amounts. At the same time, the Central Bank has substantially increased requirements for payment institutions.

This second point is fundamental.

In recent years, Brazil witnessed a proliferation of smaller institutions, often with weak control structures.

With stricter requirements related to capital, compliance, and anti-money laundering measures, many of these operations have left the market.

In practice, this has already reduced space for illegal activity. But it is still not enough.

The irregular market continues to represent a significant share of the sector: illegal betting currently accounts for between 41% and 51% of Brazil’s betting market, according to research conducted by Instituto Locomotiva and LCA Consultoria Econômica.

In other words, we are talking about an enormous volume of resources that fail to generate taxes, jobs, and consumer protection, losses that could reach up to R$40 billion per year in tax revenue, according to the same industry estimates.

This leads to another important point: it makes little sense to discuss higher tax burdens or additional restrictions for companies operating within the regulated market while such a large portion continues operating outside the law.

If pressure increases on regulated operators, the effect is direct: operators, and often users themselves,  are pushed toward the illegal market.

The most efficient path to increasing tax revenue is not raising taxes.

It is bringing illegal activity into the legal market. If that happens, the regulated sector could practically double in size, and tax collection would grow accordingly.

That is why the focus must be clear: enforcement.

Supervision of payment methods, providers, and operators on both sides of the market is essential.

There is no longer room for companies to remain “on the fence,” simultaneously serving both regulated and illegal operations.

Another area that needs advancement is regulatory integration.

The Central Bank and the Secretariat of Prizes and Betting must work increasingly closely together. Combating illegal activity depends directly on this coordination.

Brazil has built a solid regulatory model for betting in a relatively short period of time.

The market is functioning, generating revenue, jobs, and user protection. Now, the country is entering a new phase: consolidation.

At this stage, there should be no doubt about where efforts must be concentrated.

The fight against the illegal market will not happen on the surface by simply taking down websites. It will happen through financial flows. Pix gives us that possibility.

Perhaps it is the most powerful tool we currently have. The question is not whether it can help. The real question is how willing we are to use it effectively.

Leonardo Baptista

Leonardo is the CEO & co-founder of Pay4Fun, a Brazilian payment institution recognized for its technology, security, and anti-money laundering prevention in Brazil’s regulated betting market.

With more than 20 years of experience in the gaming and IT sectors, he created Brazil’s first online bingo platform in 2004. In 2022, he was named one of the 10 most inspiring CEOs by CIO Business Review.