Brazil’s Central Bank Lacks Legal Tools to Combat Illegal Betting

In a hearing before Brazil’s Parliamentary Inquiry Commission (CPI) on Betting, Gabriel Galípolo, president of the Central Bank of Brazil, clarified that the institution lacks the legal authority to block illegal betting sites or intervene in financial transactions related to them. His testimony underscores growing concern over regulatory gaps amid a rapidly expanding illicit betting market.

Speaking to lawmakers on April 8, Galípolo emphasized that the responsibility for monitoring and sanctioning betting activities rests solely with the Secretariat of Prizes and Bets (SPA), the federal regulator for gambling. “The SPA is the one that defines which bet is authorised or not,” Galípolo stated. He explained that the Central Bank can only act upon SPA’s directives by informing financial institutions when to cease providing services to unauthorized operators. However, the bank itself is not
empowered to disrupt transactions directly.

Limited Reach, Escalating Market

Galípolo’s remarks highlight a broader regulatory dilemma. While the Central Bank oversees financial institutions and has responsibilities related to anti-money laundering measures, it lacks authority to penalize payment providers that process transactions for illegal betting platforms—unless such activity is linked to criminal offenses like money laundering or financing terrorism.

“We do not have the legal authority to act on transactions involving illegal bets,” Galípolo told the commission. “This is outside our scope of authority.” He added that any suspicious activity often bypasses the Central Bank and is instead flagged directly to law enforcement agencies such as the Financial Activities Control Council (COAF), the Public Prosecutor’s Office, or the Federal Police.

The scale of the illegal betting economy adds urgency to the issue. The Central Bank’s executive secretary, Rogério Antônio Lucca, estimated that Brazilians could spend between BRL 20 billion and BRL 30 billion (up to USD 3.3 billion) per month on unregulated betting platforms in 2025. Despite SPA’s recent issuance of Normative Ordinance No. 566—intended to provide clearer guidance for reporting illegal betting transactions—parliamentarians argue that the current legal framework remains insufficient.

Members of the CPI expressed concern over what they see as a legal and regulatory void. Senator Dr. Hiran Gonçalves, the commission’s chair, pointed to the lack of effective oversight and enforcement mechanisms for sanctioning financial institutions that enable illegal betting. Senator Soraya Thronicke echoed these concerns, asking whether the Central Bank could take action against payment institutions knowingly processing transactions for illegal operators.

Galípolo reiterated that such enforcement actions fall outside the Central Bank’s mandate unless criminal behavior is involved. “What we can do is, in the scope of preventing money laundering and financing terrorism, we act so that these institutions have these controls and procedures to communicate,” he said.

The regulatory ambiguity stems, in part, from the drawn-out legislative process to legalize and regulate online betting in Brazil. While initial legislation passed in 2018, comprehensive regulatory frameworks were only finalized in 2023. This gap, Galípolo noted, allowed illegal platforms to flourish largely unchecked.

Social Welfare and Betting: Another Regulatory Hurdle

The issue of social welfare funds being used for online betting further complicates the landscape. Last year, the Central Bank reported that 20% of Bolsa Família payments made in August 2024 were spent on online gambling. In response, SPA leader Regis Dudena announced plans to ban the use of social welfare funds for betting. However, enforcement may be limited, as 99% of recipients access their benefits through bank accounts rather than physical cards, making technical restrictions difficult to implement.

Galípolo made clear that enforcing such a ban is beyond the Central Bank’s remit. “Today, the Central Bank has no authority to impose this type of restriction on people who receive Bolsa Família from placing bets,” he said. “It is not within our jurisdiction, scope, nor does it have the authority to do so.”

We do not have the legal authority to act on transactions involving illegal bets. This is outside our scope of authority.

Outlook

As Brazil attempts to bring its booming online betting sector under regulatory control, the testimony from Central Bank officials paints a picture of institutional limitations and fragmented oversight. While SPA holds sanctioning authority, its reach depends on cooperation from other agencies and financial entities. For now, the Central Bank remains a passive actor in the fight against illegal betting—able to observe and inform, but not enforce.

Without legislative reform to bridge these gaps, illegal betting is likely to continue operating in the shadows of Brazil’s financial system, shielded by a regulatory framework still catching up to digital realities.