For Brazil’s MJSP, banning everything makes enforcement easier. The illegal market likes that logic

At a public hearing called by Minister Luiz Fux, the Ministry of Justice and Public Security tried to argue that prohibition helps enforcement because, in theory, everything becomes illegal. For regulated payments and betting operators, the practical message is simpler: if the state removes the licensed market, it also removes the counterparties that identify users, report suspicious activity, and pay taxes.

1. The hearing, held in the context of ADI 8027, split the MJSP’s speaking time across three departments: Public Security (Senasp), Digital Rights, and Consumer Protection (Senacon). The declared goal was to “rebuff” the argument that prohibition creates negative externalities. What followed was a sequence of numbers without context, comparisons that do not hold up, and the core claim that prohibition aids enforcement because everything is now illegal.
2. The Senasp representative said MP 1,394 “ends the fog” between legal and illegal activity, which he said had made work harder for Coaf, the police, and social networks. But since 1 January 2025, the Secretariat of Prizes and Bets (SPA/MF) had maintained a public list of authorized companies, with the mandatory “.bet.br” domain. If a company was not on that list, it was illegal. That is not a gray zone; it is an objective test that any citizen, bank, or digital platform can check.
3. The licensed operator was also part of the enforcement chain. It identified bettors by CPF, reported suspicious transactions to Coaf, sent data to Sigap, and paid taxes and mandatory allocations to legal beneficiaries. Under prohibition, that counterpart disappears. What remains is the clandestine operator, who identifies no one, reports nothing, and collects not a cent.
4. To support the claim that “regulation did not protect society,” Senasp cited 236 operations by the Civil and Federal police between January 2022 and September 2026, with more than 480 arrests, more than 1,600 search warrants, and R$ 17.8 billion in judicial orders. The problem is that most of those operations targeted the illegal market: unauthorized sites, clandestine operators, and money-laundering schemes with no link to the SPA. Put everything in one bucket and you can use crimes from the illegal market to condemn the regulated one. It is a familiar mistake, just dressed up as official policy.
5. The timeframe makes the distortion worse. Brazil’s federally regulated market only began in January 2025, so three of the almost five years covered by the statistics belong to the pre-regulation period, when no company had federal authorization. The secretary said “many” operations hit authorized platforms, but did not say how many. Without that number, the statistic proves nothing about regulation. It only proves that the illegal market was already the problem.

For high-risk PSPs, the operational point is obvious: a regulated market gives banks, acquirers, and payment processors a counterpart that can KYC users, file suspicious-activity reports, and transmit transaction data. Prohibition removes that layer and leaves only the operators that do none of those things. Enforcement gets simpler on paper. In practice, the data trail gets thinner.