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Impact of the grey market on the gambling industry in LatAm
Latin America’s grey market remains quite large despite active measures to regulate the gambling industry. According to insights from 1xPartners, questions continue to arise about why players keep choosing offshore operators when legal ones are available and how the situation can be taken under control.
The grey markets of Chile and Guatemala
Latin America is known for its modern player-protection technologies; for example, 34% of the region’s “white” operators use AI monitoring systems, while KYC levels are at 84%. But inaction in some countries lets offshore operators work freely and not pay attention to player protection measures.
Chile
In Chile, there’s a clear gap in gambling regulation, with the lack of laws allowing the country’s grey market to expand. Regulators have been working on introducing a new gambling law since 2022, but political and economic factors have prevented the legislation from being finalized and implemented.
At the moment, it’s planned that grey market operators will get a 12-month cooling-off period, giving them time to exit the Chilean market. If an operator wishes to get a license after the transition, then it must pay any tax debts that have accumulated during its illegal operations.
It’s still not clear how the new legislation will be implemented, but if the regulators fail to enforce new laws, the grey market in Chile will continue thriving.
Guatemala
The gambling laws in Guatemala were first adopted back in the 19th century, with lotteries being the exception. As a result, some gambling operators have taken advantage of this by obtaining licenses from lottery operators. Other operators that work without licenses are the ones creating the country’s huge grey market.
Although the grey market is growing in Guatemala’s gambling industry, the government has no plans to introduce new laws in the near future, which means the country may continue leaving its players without necessary protections.
Looking at the two markets, it can be noted that both have weak government control over financial flows in their countries and share passive responses to changes in the market.
Risks for industry stakeholders
Users of these illegal services don’t get the appropriate protections, and the absence of responsible gambling programs leads to players seeing gambling as a method of earning money. From the perspective of legal operators, they work in unfair conditions, as offshore operators avoid taxes and player safety measures. This decreases the value of the efforts taken by licensed operators and may even lead to them exiting the market.
High tax pressure is another important point. Instead of collecting state revenue, taxes get lost because some operators choose to offer services illegally, and others simply leave the market as it becomes unprofitable.
Solutions and the role of technology
The best method to fight the grey markets is the modernization of legislation. Countries like Chile and Guatemala can take a look at Brazil, which began regulating its market in 2025 and has since accumulated $7 billion from legal gambling operations.
The digitalization of the gambling sector is also a key element for gambling legalization. Latin America is the leader in real-time monitoring at 69%, and KYC checks at 84%. As a result, using high-tech solutions in other countries in the region can help force illegal operators out.
Additionally, Latin America is generally very liberal towards restricting advertising and bonuses, so this factor can be used to attract players to legal operators.
Conclusion
Because of an unregulated legal environment, governments suffer tax losses, unfair competition arises for licensed operators, and player protections are left neglected. The gap is especially visible in a region where players consider gambling a way of investing instead of viewing it as simply fun.
The conclusion is that countries with large grey markets have to follow the example of neighboring countries that have already created and implemented regulated markets, taking their cases as the basis for new laws. If regulators start to coordinate their efforts to create a single safe space for players, then the process will speed up much faster, and it will become easier to build a more sustainable and transparent ecosystem for both players and industry stakeholders.
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