Brazil’s online betting market has grown exponentially in recent years, driven by the popularization of internet access, the growing supply of digital platforms, and the domestic interest in sports, especially soccer. Although sports betting have been legalized in part since 2018, the market continues to operate with a lot of freedom and low enforcement.
Nonetheless, the regulation, even if inconsistent, only served to further foster the growth of this market, drawing both domestic and international operators that started supplying a wide array of betting products.
No wonder Brazil is always on the list of countries that consume the most sports betting in the world. In 2023, the amount disbursed surpassed BRL54 B, with bettors being mostly men, from lower middle-class, aged 30 to 40, in search of entertainment and financial gains.
It turns out that this unbridled increase has exposed a dangerous vulnerability: the over-indebtedness of bettors and its impact on the Brazilian economy.
In view of this challenging scenario, the regulatory process gained momentum, especially with the issue in 2023 of Provisional Presidential Decree (MP) 1182, which among several points sought to address topics such as operator licensing, taxation, consumer protection, enforcement, and penalties.
According to Isaac Sidney, President of the Brazilian Federation of Banks (Febraban), it is essential that such measures are immediately and effectively implemented, because “We are facing a potentially critical scenario. Given the size of this online gambling world, we have a picture of startling magnitude.”
According to the President of Febraban, “without control, we will have serious consequences on the financial health of both families and companies. Damages not only reach those who bet unreasonably. We can have harmful effects impacting consumption, trade, retail, that is, the economy as a whole. This would harm even those who do not gamble, who will never gamble. There may even be an increase in credit, insofar as, if the household budget decreases, this impacts the ability to pay, burdening household income. This increases delinquency, in addition to leaving less resources for consumption.”
Among several possible measures to mitigate its harmful effects, Isaac Sidney points out that the prohibition of credit card use by platforms, a measure already provided for in MP 1182 but not yet implemented, is healthy.
And why could such a measure actually mitigate the negative impacts of bets? This is because their combination can amplify several negative cognitive biases, fruits of human irrationality, leading to harmful behaviors and reckless financial decisions.
As explained by Daniel Kahneman, a psychologist and Nobel Prize winner in Economics and one of the main champions of behavioral economics, the human being has cognitive biases that are nothing more than systematic patterns of deviation from the norm or rationality, which result in non-optimal judgments and decisions, especially when we make faster, automatic, and intuitive decisions.
Within this context, easy and quick access to credit can make bettors more likely to place excessive bets, as they do not immediately realize the financial impact (overexposure bias), in addition to having the false sense of financial freedom, causing bettors to spend more than initially planned, influenced by easy credit (anchoring effect bias).
Bettors may also mistakenly believe that they have control or influence over the outcome of games by committing to more frequent and risky bets, even after significant losses, in the hope of regaining what they have lost (bias of illusion of control, escalation of commitment, and outcome analysis). Added to this is the fact that bettors may believe that a string of past events (such as a series of losses) increases the probability of winning in the future, leading them to use credit to continue betting (gambler’s fallacy bias), and may continue to use credit in the hope of recovering previous losses, even though they know that this may lead to greater debt (loss aversion bias).
This way, these biases can lead to a dangerous cycle of indebtedness and financial loss, especially when individuals fail to control their impulses and realize too late the impacts of their choices.
Autor: Guilherme da Costa Ferreira Pignaneli • email: guilherme.pignaneli@ernestoborges.com.br
