Brazil Betting Operators Facing Advertising Blackout

July 8, 2022
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Offshore sportsbook operators active in Brazil could be prohibited from advertising in the country until a local licensing regime becomes effective, under legal amendments approved by the lower house of Congress late on Wednesday.

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Offshore sportsbook operators active in Brazil could be prohibited from advertising in the country until a local licensing regime becomes effective, under legal amendments approved by the lower house of Congress late on Wednesday (July 6).

The Chamber of Deputies voted 398-13 to pass a series of amendments to the December 2018 law that authorized fixed-odds sports betting, as part of a broader package of legislation related to professional and amateur sports in Brazil.

Among other changes would be a ban on “any form of advertising or publicity by companies without a legal representative in Brazil that operate bets related to real sporting events.”

Brazil-facing sports-betting companies are currently in a state of legal limbo as they await implementation of a licensing system under the 2018 law, which has nevertheless triggered an avalanche of marketing and sponsorship deals over the past three and a half years since it arguably made advertising of sports betting permissible under Brazilian law.

Currently, 18 of 20 teams in Brazil’s top football league has a betting sponsor. Other operators have inked marketing partnerships with major Brazilian personalities, such as a tie-up between Flutter’s Betfair and the legendary Brazilian footballer Ronaldo that was announced last week.

“The language of the amendment, as proposed by the Chamber and if approved by the Senate, will prohibit all current marketing and advertising,” said Luiz Felipe Maia, a partner with law firm Maia Yoshiyasu in São Paulo. “It will impact all sponsorship agreements, media and other investments until local operations start.”

The legislation approved on Wednesday evening would also make a further change to the December 2018 law by appearing to grant Brazil control over betting on their games and requiring any events subject to fixed-odds betting to be “authorized and able to be audited by the relevant sporting federation.”

The package of sports-law changes would also raise the proposed effective tax rate for legal sports betting in Brazil by a percentage point, with an extra percent of gross revenue being channeled to sports entities including the Brazilian Olympic Committee.

The current sports-betting law, as amended last year, envisages a blend of turnover- and revenue-based taxes that legal experts say would amount to around 19 percent of gross revenue for online betting.

A potential increase in that rate is already in the works, however, as a result of Congress' decision this week to override a presidential veto of a separate bill that would temporarily allocate a further 3 percent of prize payouts from all lottery games, including fixed-odds betting, to fund cultural initiatives.

Felipe Carreras, the rapporteur of the sports-law bill who recently served in similar role for broader gambling legislation passed by the Chamber of Deputies, told colleagues on Wednesday the measure “recognized the importance of sports not just in the development of champions and medalists, but in the development of a citizen.”

Whether the changes to sports betting will actually become effective is uncertain.

After passing the lower house, the sports-law bill now must also be approved by the Senate, while it could also be vetoed on a line-item basis by President Jair Bolsonaro.

Still, the amendments and other tax changes are yet another wrinkle in what is an increasingly frustrating process to roll out legal sports betting in Brazil.

Although the December 2018 law granted officials a window of up to four years to adopt regulations for online and land-based betting, launch of the regulated market now looks highly unlikely to occur before November’s FIFA World Cup.

After a draft regulatory decree was leaked in May, officials in Brazil’s Ministry of Economy last week all but conceded they had no idea when regulations would be approved by President Bolsonaro as the timing was now a political question in light of impending general elections this October.

Speaking on a conference call on Wednesday with analysts, Entain CEO Jette Nygaard-Anderson said the operator of the market-leading Sportingbet brand in Brazil was currently expecting regulations to be published just after the elections, but not before the World Cup, with licenses issued in mid-2023.

Unlike newer entrants, Sportingbet has traditionally advertised a free-to-play site in Brazil rather than its sports-betting platform.

Entain’s revenues from Brazil were up 26 percent in the second quarter, but came in slightly lower than expected due to increasing competition in the market ahead of regulation.

“It’s interesting looking at the competitive intensity over there — it’s not just some of the larger operators positioning themselves ahead of regulation; it’s also a very large number of smaller unlicensed or lower quality operators,” said Entain deputy CEO Rob Wood. “So clearly a licensing regime will help tidy that up.”

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