The landscape of online gaming in Mexico was irrevocably altered this past week. On October 31, 2025, the Mexican Senate passed a highly contentious bill, approving a massive tax hike on online gambling. The new measure increases the federal tax on iGaming from an already high 30% to a staggering 50%, sending shockwaves through one of Latin America’s largest and fastest-growing markets.
While the government has framed the move as a necessary step for public finance and social health, the iGaming industry is warning of catastrophic consequences. At the center of the debate are two critical questions: Who will actually pay for this, and is this move a brilliant revenue-generator or a fatal gift to the black market?
Who Gets Hit by the Tax: Players or Companies?
On paper, the new 50% tax is levied on the gambling operators, not the players.
The tax is an amendment to the Special Tax on Production and Services (IEPS), a federal excise tax. Critically, there is conflicting information on whether the 50% is applied to Gross Gaming Revenue (GGR)—the amount operators have left after paying out winnings—or, in a far more dire scenario, on total turnover (the total sum of all bets placed).
- If it’s a 50% GGR tax: This is still one of the highest in the world and puts an immense financial burden on operators.
- If it’s a 50% turnover tax: This is economically prohibitive. As one analysis pointed out, a 50% tax on every $100 bet on a slot machine with a 4% house edge would be a tax of $50 on a GGR of just $4. This would equate to an effective tax rate of 1,250% on revenue, making it impossible to operate legally.
Regardless of the technical basis, a tax this high on operators is not paid in a vacuum. The cost will inevitably be passed on to the consumer, meaning players will absolutely feel the hit.
Here is how the new tax will indirectly punish players:
- Worse Odds & Payouts: To maintain any profit margin, operators will be forced to lower the Return-to-Player (RTP) on games. Your favorite slot machine will likely pay out less, and sportsbook odds will become less favorable.
- Disappearing Bonuses: The generous deposit matches, free spins, and promotional offers used to attract new players will likely dry up. Operators will no longer be able to afford these customer acquisition costs.
- Market Exodus: Many of the largest and most reputable international operators may decide the market is no longer profitable. This will lead to a mass exodus, leaving players with far fewer legal, safe, and regulated options.
The Heart of the Controversy: A “Sin Tax” or a “Black Market” Boom?
The bill has become one of the most contentious topics in the Mexican economy, creating a deep divide between the government and the private sector.
The Government’s Stance
The administration of President Claudia Sheinbaum has defended the tax as part of a broader “healthy taxes” initiative. The official reasoning is twofold:
- To Fund Public Programs: The government has framed the tax as a “sin tax,” similar to those on tobacco and sugary drinks. The revenue generated, estimated to be in the billions, is earmarked for public health programs and to help tackle the federal deficit.
- To Curb Illicit Activity: In an official report, the government claimed the tax hike would “support efforts against money laundering by making income more transparent” and “reduce the space for illicit operations.”
The Industry’s Rebuttal
The iGaming industry and private sector business leaders have reacted with uniform alarm, calling the government’s reasoning dangerously flawed.
Alfonso Pérez Lizaur, president of the Association of Permit Holders, Operators, and Suppliers (AIEJA), warned that the tax would have “catastrophic economic repercussions.”
The industry’s core argument is that this tax will not increase revenue or curb illicit activity; it will do the exact opposite.
- It Will Fuel the Black Market: The central warning is that a 50% tax makes the legal, regulated market uncompetitive. Players seeking better odds and bonuses—or simply trying to find brands that have fled the legal market—will be pushed en masse to unlicensed, offshore “black market” sites.
- It Will Decrease Tax Revenue: As legal operators shut down or lose their customer base to illegal sites, the government’s tax base will evaporate. Industry analysts project that the government could lose as much as MXN 12 billion (USD $650 million) in revenue due to market contraction.
- It Will Harm Players: The black market comes with no consumer protections. Players who migrate to these illicit sites will have no recourse in cases of fraud, non-payment of winnings, or disputes, completely undermining the government’s stated goal of protecting the public.
A High-Stakes Gamble for Mexico’s Future
With the bill now passed by both the Chamber of Deputies and the Senate, it awaits only the president’s signature to become law.
Mexico has placed a massive bet. The government is betting that it can wring billions from a booming industry to fund its social agenda. The industry, in turn, is betting that this move is an economic miscalculation that will destroy the legal market, harm consumers, and ironically, starve the government of the very revenue it seeks.
The coming year will reveal who was right. It will determine whether Mexico just secured its public finances or if it just became the world’s largest case study in how to accidentally create a thriving black market.
