Brazil is grappling with a mounting online betting crisis, as the government rushes to implement stricter regulations amid concerns over spiralling household debt and addiction.

The executive said it will ban using credit cards for online betting as soon as October, though this may not be enough, as such transactions reportedly make up only 3% of the total.

Amid growing pressure from political and economic actors over Brazilians' rising online betting expenditure, major industry players plan to pre-empt regulation by blocking credit card payments from October 1.

A Finance Ministry ordinance originally mandated this prohibition in January 2025, when full market regulation was set to come into force.

But other payment methods play a much bigger role: a recent central bank survey revealed Brazilians transferred a staggering BRL20bn ($3.7bn) monthly this year to online betting and casino platforms via the popular instant payments app Pix alone.

In reaction, Central Bank President Roberto Campos voiced concern over these games' impact on household debt, particularly among vulnerable groups.

Alarmingly, an estimated five million Bolsa Família benefit recipients transferred BRL3bn ($551mn) to betting firms via Pix in August.

"We will make these recommendations explicit, to show government agencies and the media that this is also our concern. We believe that by opening credit cards the situation will get out of control," Plínio Lemos Jorge, president of the National Association of Games and Lotteries, told O Globo.

This data sowed panic among officials, who had been gearing up for regulations set to take effect in January 2025. If maintained, the current betting volume could mean an annual Pix expenditure of BRL240bn ($44bn) for 2024, far exceeding the economic team's behind-the-scenes estimate of BRL100bn.

According to a report by Folha de Sao Paulo, MPs allied with President Luiz Inacio Lula da Silva’s Workers' Party (PT) are now scrutinising the terms of betting legalisation through legislative initiatives, despite having overwhelmingly supported the bill that established the current online betting rules last year.

Even PT members now admit they underestimated the negative effects and scope of this market on Brazilians' finances. Online betting has been legal in the country since 2018, with the phenomenon growing steadily, fuelled by aggressive advertisements on television and social media.

To counter this, the Treasury aims to enact a range of measures discouraging uncontrolled platform use. Finance Minister Fernando Haddad suggested "treating games like cigarettes", while Ministry Executive Secretary Dario Durigan called the issue a "huge scourge", stating that authorised platforms must share information with the government to monitor debt via Brazil’s social security identification number, called CPF.

In a bid to tackle the crisis, acting President Geraldo Alckmin recently convened Treasury, Health and Justice officials to discuss curbing online gaming addiction and educating users, though no decisions were reached.

Meanwhile, the National Confederation of Commerce (CNC) has petitioned the Supreme Federal Court to declare the sports betting law, sanctioned by President Lula last December, unconstitutional. The CNC seeks to suspend the legislation's effects immediately until the trial concludes.

The Finance Ministry began drafting regulations in this regard in 2023 following Congressional approval. One provision bans unrestricted credit card use on betting platforms from January 1 2025, when only licensed firms will be able to operate.

However, in tandem with the credit card ban, the Treasury has now brought this rule forward, requesting the blocking of all unlicensed platforms from October 1.

Betting firms will be obliged to require income self-declaration from punters and set limits on stake values and playing time to mitigate addiction risk and debt.

"Gambling, as a whole, is always a reason for loss, because the bank always wins. There must be awareness that it can be a leisure option, but gambling has to be responsible, it has to be done with care, whether for mental health or debt," said Durigan.

The new rules mandate firms to identify and classify gambler risk, report suspicious transactions to the Financial Activities Control Council, run addiction risk advertising campaigns, and limit bets based on time, game numbers, and amounts spent.

In another sign of the gravity of the situation, a study by financial technology firm Klavi indicated that about 30% of bank account holders have sought credit within the past year to fund gambling, Estadao reported.

Klavi examined the financial behaviour of 5,000 clients nationwide to assess expenditure on betting platforms and gambling applications.

Using its database and open banking information, the firm anonymously compiled data and scrutinised account statements, isolating other expenses and comparing them with payments to betting company-linked social security numbers.

The research found diverse betting patterns among individuals. For those borrowing to finance gambling, the average expenditure per bettor was BRL1,113 ($204), though some instances showed much higher amounts.

With billions of reais at stake and millions of lives affected, Brazil's battle against the online betting surge is more than just a national issue—it's a litmus test for how governments can adapt to and regulate the ever-evolving fraught landscape of digital entertainment and finance in an increasingly connected world.