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A seven-figure fine issued in São Paulo has underlined the prospect of online betting operators facing enforcement actions by state consumer protection agencies, as well as the multitude of regulatory agencies sketching out their role in Brazil’s newly licensed market.
Procon-SP, the consumer protection authority in São Paulo state, on March 19 announced a fine of R$1.1m ($200,000) against PixBet, in a first-of-its-kind enforcement action in Brazil’s new era of regulation.
It may not be the last, however, with legal experts anticipating state-level consumer protection authorities to play an active role in enforcement even though they do not have the same direct regulatory authority over licensed operators as the Secretariat of Prizes and Bets (SPA) in Brazil’s Ministry of Finance.
“The industry should indeed be cautious, not only because of the fragmented nature of enforcement in Brazil, but also due to broader factors such as persistent stigma around betting, lack of familiarity with the new regulatory framework among authorities, and a certain desire to ‘make an example’ through high-profile actions,” Fernanda Meirelles, a partner at FAS Advogados law firm, told Vixio GamblingCompliance.
“Given the autonomy of state consumer protection agencies, we may see more initiatives like this coming from different parts of the country.”
In a statement announcing the R$1.1m penalty against PixBet, Procon-SP cited a series of “practices contrary to consumer protection legislation” that were observed on both its dot.com and Brazil-licensed websites.
Among other things, Procon stated that the sites’ terms and conditions contained “several abusive clauses that leave consumers at an excessive disadvantage”, including by allowing PixBet to prevent or limit the withdrawal of unused funds deposited by players into their accounts.
The operator has the right to appeal the fine, Procon said.
Brazil’s federal gambling regulator, the SPA, established specific consumer protection regulations for online betting through an August 2024 ordinance, and it has the authority to impose its own penalties in the event of non-compliance by licensed operators such as PixBet.
At the same time, Brazil’s national consumer protection authority, Senacon, also appears to be actively monitoring the newly-regulated industry.
An agency under Brazil’s Ministry of Justice, Senacon, last year took action to demand specific information from prominent operators to demonstrate their compliance with legal prohibitions on welcome bonus offers or risk stiff fines.
In February, Senacon inked a formal cooperation agreement with the SPA aimed at educating bettors and both state and local authorities regarding consumer rights in Brazil’s regulated market.
Still, state agencies generally have independent authority to take their own enforcement actions when they believe the rights of consumers are being violated, particularly when the company in question is also headquartered in their jurisdiction.
Procon-SP has previously made inquiries of online betting companies, but the PixBet action has caught the attention of the industry both due to the size of the penalty and because it is the first such fine levied against an operator since online casinos and sportsbooks have had to become licensed and be incorporated in Brazil, said Lisa Worcman, a partner at Mattos Filho law firm.
São Paulo’s consumer protection watchdog is arguably the most prominent and active in Brazil, Worcman said, but there are equivalents in each of Brazil’s 26 states, as well as in many municipalities, and it is hard to predict which of them may look to take action against gambling operators.
Enforcement actions by state consumer authorities are likely to “occur with some frequency”, Worcman told Vixio GamblingCompliance.
“In Brazil, consumer protection agencies such as Procon are very active and have broad authority (subject to case-specific considerations) to challenge actions that violate consumer rights,” she said.
“Given the negative press the industry has received in recent months, we understand these agencies are closely monitoring operators, particularly with regard to user transparency, potential abusive clauses, and responsible gaming measures.”
Overlapping Regulatory Agencies
As highlighted by Vixio’s recent Brazil Online Outlook report, the likely enforcement activity by state-level consumer agencies comes on top of the already wide range of federal authorities beyond the SPA that can claim at least some kind of regulatory role over online sports betting and casino games.
In addition to Senacon for matters of consumer protection, operators are accountable to the financial crimes regulator COAF regarding anti-money laundering and to the Ministry of Finance’s Federal Revenue Service on tax-related issues, including potential back taxes based on past activities.
Self-regulatory body CONAR oversees compliance with Brazil’s advertising code, although it cannot levy fines against operators, while enforcement activities related to web-blocking and payments fall under the jurisdiction of telecoms authority ANATEL and the Brazilian Central Bank, respectively.
In addition, the Brazilian Ministry of Sport has its own sports-betting secretary with express authority over issues of sports integrity and in determining the range of sporting events that licensed operators may accept bets on.
In recent months, the SPA has established a series of formal working groups with the various other federal agencies, as well as Brazil’s Ministry of Health, to establish clearer lines of communication and cooperation in the oversight of the regulated market.
The federal gambling regulator also has announced its intention to collaborate with states in setting up a national betting system that should include harmonised rules in specific areas such as AML and responsible gambling.
But it is fair to say that the lines of where the SPA’s oversight authority may overlap with those of other state or federal agencies are still being drawn, and legal experts are not expecting the federal gambling regulator to be able to step in to prevent other bodies from taking action in their respective areas of concern.
The fierce media and political scrutiny that fell on the industry before the launch of the legal market may have only amplified the challenge faced by operators.
Because of the widespread questioning of the ethics of online betting last year, “every agency now feels they can be responsible for questioning and challenging the industry”, said Worcman of Mattos Filho. “We’re going to see several different agencies looking at the opportunity to take enforcement actions.”
One pending legal question is whether the SPA and other state or federal regulatory authorities would be able to start a separate enforcement action based on a specific compliance violation already punished by another agency, said Udo Seckelmann, a partner a Bichara e Motta law firm in Rio de Janeiro.
He agreed the SPA is unlikely to assert its primary regulatory authority over other Brazilian agencies in the near term.
“This is the scenario we are in right now in Brazil. There are several bodies, each one within its own boundaries, and they will all be establishing sanctions and imposing their rules,” Seckelmann said.
