Legislation to regulate sports betting and online gaming is now law in Brazil. But several key policy questions still need to be answered either through Ministry of Finance implementing regulations, or by legal challenges brought before Brazilian courts. Here, we offer our perspective on what to watch in the coming weeks and months.
Online Gambling in Brazil: An Overview
Law 14.790 was signed into law on December 30 to create a national licensing regime for fixed-odds betting on sporting events and other forms of online gaming, teeing up Brazil to be arguably the most exciting new market opportunity for online gambling operators and suppliers in 2024.
As explored in a recent Vixio GamblingCompliance webinar, however, operators establishing a subsidiary to obtain a Brazilian licence should expect to confront a litigious culture and no shortage of unique compliance challenges.
Meanwhile, Law 14.790 also raises questions regarding the enforcement of several provisions that are included in the landmark legislation, with Brazil’s Ministry of Finance set to play a critical role in clarifying various aspects of the new law through forthcoming regulatory ordinances.
Below we explore 3 of at least 6 areas of policy uncertainty as Brazilian officials and industry stakeholders prepare for the new era of regulation in the country. Other areas highlighted for Vixio subscribers include restrictions on bonus offers, the status of state-level licences, plus how player winnings taxes will be applied.
1) Brazil Investor Requirement
Will a statutory requirement for Brazilian investment partners be challenged in court?
One provision of Law 14.790 ripe for potential legal challenge, according to Brazilian lawyers, is the section of Article 7 directing the Ministry of Finance to require all licensed operators to have a Brazilian shareholder who owns at least 20 percent of their company. The stated intention of the provision, according to the Brazilian senator who added it to the legislation, is to “guarantee the participation of Brazilian investors in the composition of companies that may operate in the sector.” But legal experts contend the requirement likely violates Brazil’s constitution, as well as its commitment to various international investment treaties.
“I think all companies have good legal grounds to challenge the legality of that provision if it is approved.”
- Luiz Felipe Maia, founding partner of Maia Yoshiyasu law firm
2) Transitioning To A Regulated Market
What conditions will be applied to a transition period for current offshore operators?
A key question to be answered through forthcoming Ministry of Finance regulations is how licence applicants will be able to transition to a regulated market without first ceasing their current operations in Brazil.
Article 39 of Law 14.790 establishes new administrative penalties for the offering of any form of fixed-odds betting in Brazil without due authorisation. However, Article 9 of the law also requires the finance ministry to establish “the conditions and deadlines, of not less than six months, for companies that are already operating to adapt to the provisions of this law and the rules established under it through specific regulations”.
As things stand, it is not clear whether a transition period may extend beyond the minimum term of six months or what compliance conditions might apply to Brazil-facing operators intending to become licensed.
An overlapping question is how the transition period will align with a Ministry of Finance licensing ordinance of October 2023. That ordinance saw a total of 134 operators submit formal expressions of interest in a licence, in return for a promise of receiving “priority in the review of their applications” once the licensing process begins.
On a related front, there are conflicting timelines for further enforcement provisions that will require Brazilian ISPs, advertisers, and payments and internet application providers to cease activities involving unlicensed sites.
3) Defining ‘Virtual Online Gaming Events’
Will certain types of online casino games be excluded from the Brazilian market?
Law 14.790 does not specify which kinds of online casino games may be offered in Brazil’s regulated market. Instead, it merely recognises that “virtual online gaming events” can be subject to fixed-odds betting, along with real-life sporting events.
Online gaming is defined under the law as “the electronic medium that enables a digital bet on a game whose result is determined by the outcome of a future random event through a random generator of numbers, symbols, figures or objects, as defined through regulations”.
It could be argued that live casino games would not meet the above definition as they are determined by the actions of real-life dealers rather than random number generators, although legal observers are confident there is ample scope for live casino to still be accommodated through administrative rules.
Online gaming events also must fit squarely within the new law’s definition of a fixed-odds bet, raising questions as to whether certain forms of jackpots might not be permissible. Establishing greater clarity around the types of online casino games that will be permitted appears to be an issue the Ministry of Finance is preparing to tackle head-on, according to comments made on social media by key officials central to the rulemaking process.
“Permitted games will be defined in the rules and the rest will be prohibited”
- José Francisco Manssur, special advisor to the ministry, in response to Law 14.790’s enactment
Want to know more?
These are just some of areas of uncertainty concern for many online gambling operators and suppliers preparing for Brazil’s regulated market in 2024. Vixio customers get full access to the latest developments on, and expert analysis of, this hot topic as and when it happens.
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