Illegal Lotteries Drain Costa Rica’s Charity Funding Pipeline
Costa Rica’s black-market lottery economy has become a direct threat to the country’s state-run charitable gaming system, with some estimates putting illegal lottery handle at more than $500m a year.
The country’s Junta de Protección Social (JPS), which operates the official lottery, estimates that by 2022 it controlled less than half of the market. Authorities also suspect some illegal lottery operations are being used to launder proceeds tied to drugs, contraband and other illicit activity.
Police chief Marcelo Solano told Bloomberg that enforcement has failed to slow the spread of unauthorized sellers across San José. “We search the places, we intervene, we detain the person in charge,” Solano said. “And then they start the same business all over again. Sometimes the next day.”
Higher Payouts Are Pulling Players Away From JPS
The illegal games mirror Costa Rica’s official lottery draws but offer higher returns on basic wagers. Bets on numbers between 0 and 99 pay 70 times the stake through the official system, compared with 90 times through unlicensed sellers.
Many illegal operators use official JPS draw results to determine winning numbers. That gives players confidence in the outcome while allowing illegal sellers to compete directly against the state product.
The pressure comes as state lotteries globally face competition from sports betting, online casinos, prediction markets and casino-style apps. Bloomberg cited crackdowns in Brazil, Indonesia, Singapore, France, Portugal and India as governments try to contain unlicensed or loosely regulated gambling.
Costa Rica’s issue is particularly sensitive because lottery proceeds fund healthcare, elderly care and social programs. The JPS said it paid 209bn colones ($406m) in prizes in 2024, equal to 75% of revenue, and distributed 32bn colones to charitable causes after costs.
Some charities are already feeling the impact. The Barva Clinical Association of Palliative Care, which supports patients with cancer, Parkinson’s and Alzheimer’s, said lottery funding has declined over the past five years. Director Grettel Zárate Murillo told Bloomberg: “We might have to close.”
Illegal Lottery Sales Raise AML Concerns
Authorities increasingly frame the illegal lottery market as a financial crime issue, not just unauthorized gambling. Costa Rica’s Organismo de Investigación Judicial (OIJ) said local shops often use computerized systems to coordinate sales and payouts, while betting income can be mixed with normal retail revenue.
Last year, Costa Rican investigators confiscated $2.9m in property and cars from a group accused of controlling about 200 lottery shops and linked the case to money laundering. Authorities have also detected authorized sellers offering illegal games alongside official tickets.
The JPS pushed for legal reform that would modernize lottery laws dating back to the 1950s and give it authority over digital betting, sports betting and mobile apps. The proposal included prison sentences of up to six years for those administering, operating or financing unregulated lotteries. The bill failed before Costa Rica’s national elections this year.
💡 TGJ Take
Costa Rica’s problem is not only illegal lottery sales. It is a product competitiveness gap. Players are choosing faster payouts, higher returns and easier access over the charitable argument regulators keep pushing. For state lotteries and regulated operators, the warning is clear: if legal products are slower or less rewarding than illegal alternatives, enforcement alone will not pull players back.
