Brazil's Supreme Court weighs gambling ban as Dias Toffoli warns prohibition would push sports betting into the illegal market

Brazil’s Supreme Federal Court (STF) is reviewing whether the criminal code provision banning games of chance still fits the 1988 Constitution, and the hearing turned into a useful reminder for PSPs: blanket prohibition does not make payments disappear, it just changes where the money lands. Dias Toffoli said that if everything is banned, activity moves underground and state oversight disappears.

1. During a plenary session on Thursday (6/8), Toffoli argued that a total ban on sports betting would expand the illegal market and make enforcement harder. “If you prohibit everything, it goes into illegality. And illegality is worse, because the State has no control,” he said.
2. He cited data from a financial institution showing that 15 of its 20 largest Pix recipients were illegal betting sites. The point for payment providers is obvious enough: when the flow is there, the operator structure often is not. Toffoli said these operations use CNPJs that disappear after collecting funds, leaving customers with no practical way to recover transferred amounts.
3. The case being discussed asks whether Article 50 of the Criminal Contraventions Law, which criminalizes gambling operations, was received by the 1988 Constitution. The appeal has general repercussion recognized, so the court’s reading matters beyond this one dispute, including for the legal boundary between regulated betting, unlicensed operators, and payment processing exposure.
4. Toffoli drew a line between licensed companies, which appear in sports broadcasts, and clandestine platforms operating outside the reach of regulators, including sites based in countries with which Brazil has no diplomatic relations. He also said betting affects people across ages, social classes, and income brackets, calling it “a social disease.”
5. On the other side, reporting justice Luiz Fux voted to uphold the rule, and Flávio Dino agreed with that conclusion but said the court should examine the cases on betting regulation in a coordinated way to avoid inconsistent treatment across gaming categories. Dino then asked for a review, which suspended the case. The matter is being heard under RE 966.177.

For high-risk PSPs, the practical takeaway is not subtle: Brazil’s legal debate is still unresolved, but the court record already shows how fast unlicensed betting can absorb payment flows when the regulated channel is constrained. Pix is in the middle of that discussion, and so are the merchant controls around it.