Brazil has announced measures it says will prevent black market online betting after it regulates sports betting, but seasoned market observers fear they may not be effective.
During Wednesday’s (April 12) long-awaited public hearing on a forthcoming legal decree for online sports betting, special advisor to the Ministry of Finance, José Francisco Manssur, detailed the government’s plans to stop Brazilian consumers from gambling on unlicensed sites after the new regime is implemented.
Concerns have been raised that players will remain in the black market, from which they would theoretically get to keep all their winnings, rather than face a 30 percent tax on all winnings above a certain threshold with onshore operators.
First, said Manssur, the government, as previously detailed, plans to ban and dismantle any sponsorships between unlicensed sports-betting operators and sports teams. This will include banning advertisements on TV broadcasts and other mediums.
Further, Manssur announced that commonly used Brazilian payment platform Pix will not be allowed to process payments for illegal online gaming sites and that only international credit cards would be able to be used, as others will be blocked.
Finally, unlicensed sites will have their IP addresses blocked, which the Ministry of Finance claims will be easy.
According to Udo Seckelmann, sports and gambling lawyer at Bichara e Motta law firm, the effectiveness of such measures is unclear.
“There are some grey areas where we don't actually know how it is going to work, for example with online casinos, since we are just regulating the sports-betting market. We understand that these measures are not going to be concerned with online casinos,” he said.
If a company operates an online casino, will their entire offer be blocked? And will Brazil block all gambling IP addresses that are unlicensed or just those in the sports-betting market?
“There's a big question mark,” said Seckelmann.
“I have to be honest, I don't think Brazil will be able to block everything,” he said.
Seckelmann stressed that so-called VIP players have already voiced to him publicly that they are ready to abandon the Brazilian market if taxation proves to be too hefty.
High-rollers, he said, “are prepared to leave the market”.
He explained that they are more than able to use blocking devices and outside payment methods to play on sites that are not licensed in Brazil.
Seckelmann also pointed towards discussions to potentially half the 30 percent player winnings tax rate, although he stressed that was only a possibility at this point.
Gambling consultancy Regulus Partners estimates that despite the existence of a winnings threshold before the tax becomes effective, those 10 percent of players expected to pass that limit will represent 70 percent of profits for operators in the licensed market.
“In other words, the winnings tax targets the most valuable, most savvy, most price sensitive and most mobile customers. Even with a US$500 threshold for a winnings tax, up to 80 percent of revenue might not channel and the black market is likely to thrive” they said.
Additional reporting by Joe Ewens.