Brazil Approaches Online Gambling Endgame

November 2, 2023
Online betting operators are anxiously awaiting a critical few weeks that will see politicians in Brasilia determine how Brazil will complete its transition from a grey to regulated market.

Online betting operators are anxiously awaiting a critical few weeks that will see politicians in Brasilia determine how Brazil will complete its transition from a grey to a regulated market.

A bill to regulate both sports betting and online casino games was approved in the lower house of Brazil’s Congress in September but is still awaiting action in the Senate, where industry groups are actively seeking to lower applicable tax rates while avoiding more adverse changes to the legislation.

Speaking at the SBC Summit Latinoamérica in Miami, Alex Fonseca, CEO Brazil for Superbet, said the lack of clarity over final legislation was an obvious area of concern for stakeholders planning for a regulated market.

Fonseca compared the current situation to a football match in the 85th minute with the score currently at 0-0.

“And we don’t know who is going to win,” he told SBC Summit delegates on Wednesday (November 1).

As things stand, Bill PL 3626/2023 is awaiting consideration by two specialist Senate committees on sports and economic affairs. 

Each committee will vote independently to adopt different versions of the bill, but the general consensus is the more important will be that of the economic affairs committee that is being developed by Bahia Senator Angelo Coronel in close dialogue with the administration of President Lula and with leaders of the Chamber of Deputies.

The bill could be approved by the two committees as soon as next week, with the full Senate facing a November 11 deadline to vote on the legislation.

The Senate-approved bill would still have to go back to the Chamber of Deputies to either accept or reject Senate amendments before a final version is sent to Lula to sign into law.

Andre Gelfi, managing director of Betsson in Brazil and president of the Brazilian Institute for Responsible Gambling (IBJR), told SBC delegates that the bill should be approved by the Senate by the second week in November and the legislative process completed before the end of this year, absent any surprise developments.

Gelfi said that regulation will “change the dynamics” and establish clearer lines for a Brazilian market that has boomed in recent years, driven by the role of social media influencers and more aggressive marketing techniques.

Regulation should benefit the market and the Brazilian economy overall, Gelfi said, “but it has to be done well”.

Of chief concern is the level of taxation that will be applied to online betting, according to Gelfi.

With lobbying ongoing, operators are growing increasingly hopeful of lowering the proposed headline tax rate from 18 to 12 percent of gross revenue for sports betting, although an 18 percent rate would still apply for casino-style games. 

Neither rate includes the roughly 12-15 percent in additional social security and local services taxes that would also be applied.

Other areas of focus cited by Gelfi were how advertising will be controlled, as well as a specific provision of PL 3626/2023 as passed by the Chamber of Deputies that would require deposits to be processed exclusively by payment companies approved by the Central Bank of Brazil.

Meanwhile, the use of sports team names and trademarks by betting companies is emerging as another policy battleground.

In a statement issued late on Tuesday, IBJR said it had become aware of efforts to amend Brazilian laws that currently mean sports teams would waive any claims to their names or logos in return for receiving a percentage of betting tax revenue.

The Brazilian Football Confederation (CBF) is understood to be actively lobbying for the change, leading to a potentially chaotic situation in which individual teams would be free to negotiate deals with individual operators.

Such a scenario would be “highly damaging for consumers, national sport and the government itself”, IBJR said.

In general, Brazilian policymakers must tread carefully because of the “unique characteristics” of an offshore market served by as many as 3,000 sites, said Luiz Felipe Maia, founding partner of Maia Yoshiyasu Advogados law firm in Sao Paulo.

Many operators will not apply for expensive licences costing as much as R$30m, or around US$6m, if there are harsh restrictions on advertising, while income taxes on winnings will also push players offshore, Maia warned.

Looking ahead to the regulated market, Fonseca of Superbet predicted that Brazil would consolidate around 10 to 15 major national operators.

Still, there may also be room for others to establish a “niche” in specific regions of Brazil, by tailoring their offerings to local markets and serving players on an omnichannel basis.

Regionalisation of the Brazilian market would reflect not only the size and diversity of the country in general but also the prospect of state-level licences being available alongside those of the forthcoming federal regime.

State lottery authorities in Rio de Janeiro and Paraná have already issued their first licences for fixed-odds betting, with further states potentially following suit in the future. 

Gelfi of IBJR said the activity by state lotteries has created “legal insecurity around how these licences will be balanced with a future federal regulation”.

Specific policy areas that need to be addressed include taxation, given the lower rates being applied by states compared with federal legislation, as well as how widely state-level operators may be able to advertise.

“It is an absolutely relevant question … that is being discussed at this very moment,” Gelfi said.

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