Ecuador: Between Gambling Prohibition and Regulation

The recent opinion issued by the Attorney General’s Office of Ecuador through Official Letter No. 16528 dated May 4, 2026 once again confirms that casinos and gambling halls remain prohibited in Ecuador, even when they attempt to operate under foundations or non-profit organizations, except for the express legal exception recognized in favor of the Junta de Beneficencia de Guayaquil.

The opinion arises from the controversy generated by establishments that attempted to justify their operations on charitable or social grounds. However, the Attorney General’s Office recalls that the for-profit or non-profit nature of the activity does not alter the current prohibition applicable to casinos and gambling businesses.

This case once again raises a deeper question: does prohibition really eliminate the demand for gambling?

Comparative experience demonstrates the opposite. The provision of gambling services constitutes an economic activity whose demand persists regardless of whether the State prohibits, restricts, or ignores it. People will continue betting — whether in physical venues or online, in games of chance or even predominantly skill-based games — because the economic and recreational incentive remains intact.

As a result, when the State opts for absolute prohibition, it usually does not eliminate the market, but instead pushes it into informality and the black market. And in that environment, everyone loses.

• The State stops collecting tax revenue.

• Consumers are left without effective protection.

• There are no real anti-money laundering controls.

From an economic perspective, thinkers such as Milton Friedman argued that prohibitions on activities with persistent demand tend to strengthen underground markets rather than eradicate them.

Likewise, from a competition law perspective, authors such as Friedrich Hayek warned about the risks of legal monopolies and excessive state or para-state concentration in certain economic activities.

Another sensitive aspect of the Ecuadorian model is allowing only certain forms of gambling to operate under a legal monopoly.

Modern economic theory has repeatedly shown that monopolies tend to generate less innovation, lower efficiency, and fewer incentives to protect consumers. Even from a Latin American constitutional perspective, freedom of enterprise and private initiative function as mechanisms designed to prevent artificial market concentrations except in exceptional cases justified by public interest.

The regulatory paradox is evident: the more rigid and closed the legal system becomes, the more attractive the illegal market becomes for both consumers and operators.

Therefore, the real debate should no longer focus solely on whether gambling should be prohibited or permitted, but on which regulatory model can channel an existing economic reality into a controlled, supervised environment compatible with consumer protection and public revenue generation.

Previously published in: https://www.linkedin.com/feed/update/urn:li:activity:7460717157308497920/