Latin America’s black market gambling problem: taxes, ad restrictions, and payment controls

At a panel on online gambling regulation, speakers argued that black-market growth in Latin America is being driven less by one single issue than by a familiar combination: tax pressure, restrictive rules, uneven supervision, and operators who simply stay outside the licensed system. For PSPs and acquiring teams, the useful part is obvious: when regulation makes licensed offers too expensive or too constrained, illegal traffic does not disappear — it routes elsewhere.

1. Carlos Fonseca opened the discussion by saying taxation and regulation can end up encouraging informality when they are not reasonable. His point was blunt: “Bad taxation can generate exactly the issue we are talking about now, the black market.”
2. Neil Montgomery said the main incentive to operate outside the regulated system in Brazil is economic. Illegal gambling does not pay taxes, and foreign operators without a Brazilian licence also avoid taxes, which can leave them with better odds because they do not carry the same costs as licensed operators. He added that regulatory demands such as facial recognition, KYC (Know Your Customer) controls, and the high cost of federal licences also help keep illegal operators in the market.
3. Karen Sierra Hughes said overly restrictive regulation can strengthen the illegal market. In her view, the more activity that is brought into the legal and regulated framework, the fewer openings remain for illegal operators. She also stressed that rules need to fit the reality of each Latin American jurisdiction, and warned that excessive advertising restrictions benefit those operating outside the regulated system.
4. From the Peruvian regulator’s perspective, Vanessa Cabrera pointed to three key factors: advertising by illegal platforms, regulatory asymmetries between countries, and each authority’s own supervisory capacity. Her framing matters for payments and compliance teams because enforcement is not just about the rule on paper; it is also about how much the regulator can actually sanction, supervise, and execute against illegal operations.
5. Tatiana Vásquez said many consumers still do not distinguish between legal and illegal operators. She argued that a competitive regulatory framework is the most effective way to channel demand toward authorised operators, and added that controls over payment methods should be strengthened by involving the full ecosystem — technology providers, labs, affiliates, and payment processors — under a model of shared responsibility.

For high-risk PSPs, the practical takeaway is straightforward: in Latin America, black-market pressure is not only a licensing issue. It is a payments issue, an ad-policy issue, and a supervision issue all at once. If licensed operators are saddled with costs and controls that unlicensed rivals can sidestep, the market will do what markets do: route volume to the cheaper path.