Brazil Ready To Show Its Hand On Sports-Betting Regulations

October 28, 2021
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Brazil will definitely launch its regulated sports-betting market before next year’s FIFA World Cup, with details of the regulatory process set to be revealed very soon, a key government official said on Tuesday.

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Brazil will definitely launch its regulated sports-betting market before next year’s FIFA World Cup, with details of the regulatory process set to be revealed very soon, a key government official said on Tuesday.

Speaking on the opening day of the SBC Summit Latinoamerica in Miami, the secretary for lotteries in Brazil’s Ministry of the Economy said that operators should expect to receive “a pleasant surprise” within days, as Brazil nears a deadline to implement a three-year-old law that legalised retail and online fixed-odds sports betting.

A December 2018 law granted the economy ministry up to four years — but preferably two years — to enact regulations for sports wagering.

Gustavo Guimarães, head of the economy ministry’s SECAP unit, said the first priority of officials has been to amend the law’s tax provisions, which was achieved in June to establish an estimated effective tax rate of 20 percent of gross online betting revenue, versus the prior starting point of 3 percent of turnover.

That means Brazil’s market should be as competitive as any other in the world from a tax perspective, but has also added extra pressure to now adopt regulations and implement a licensing system, Guimarães told summit delegates.

“We have a legal deadline to regulate sports betting before the end of 2022, and we are going to comply with that,” Guimarães said.

Meanwhile, also looming large on the horizon is the 2022 FIFA World Cup in Qatar that kicks off next November and will inevitably see the Brazilian Selação start as one of the favourites to win.

“I believe it would be very bad for us to miss an event as big as that, so we are working to deliver well before the World Cup,” Guimarães said.

Brazil’s slow regulatory process on sports betting has tested the patience of market-watchers, with little by way of concrete developments this year other than the tax change and officials seemingly focused on a multitude of other projects, including the partial privatisation of state-owned energy company Eletrobras.

Still, there have been recent rumours that the government is now pushing the economy ministry to move quicker on sports betting, although Guimarães declined to provide specific details during his brief remarks at the SBC summit.

A forthcoming announcement would serve as a “torchlight” for the regulatory process, he said, suggesting that operators are likely to be pleasantly surprised at how quick the market could now be opened.

The December 2022 deadline set by law is one reason to be confident that regulations are coming very soon, said Andre Gelfi, managing partner in Brazil for Betsson, which operates licensed online betting on horseracing, as well as a new fantasy sports product in the country.

“We are facing delays, but we have the law that says this should be regulated before the end of the year,”Gelfi said during a separate keynote address. “So, base-case, the regulation should unfold during 2022.”

Sponsorships, Licensing Model Uncertain

Even in the absence of regulation, the Brazil sports-betting market has been booming in the past three years in part because the 2018 law recognised fixed-odds betting as a lawful lottery activity that it is arguably no longer forbidden to advertise.

Nearly all of the 20 teams in the top Brazilian football league have now announced a betting sponsor, while Gelfi cited recent research published by media giant Globo indicating significant growth in the number of Brazilian bettors since the start of the pandemic.

The major investments being made by offshore operators in terms of advertising and sponsorship mean it will not be easy to enter the Brazilian market from scratch once regulations are approved, Gelfi warned.

“It’s a massive market that requires full attention, both from a complexity perspective and from a competitive perspective,” he said.

Although the market may be booming, the lack of regulations is still a problem for sponsorship and advertising, said Luciana Hendrich, a lawyer and founder of advertising firm Hendrich Digital Content.

Hendrich noted how Spain and other countries have banned gambling sponsorships and it remains uncertain how Brazil will treat the officials given the regulations have not been written yet.

That situation has prevented some major operators from investing in sponsorship deals, while some Brazilian television channels still do not yet accept advertising for sports betting.

There should be little reason for Brazil to disallow betting sponsors, however, said Fernando Paz, head of sponsorships for the Copa do Brasil, Brazil’s equivalent of England’s FA Cup.

Sponsors provide a new source of revenue, which is “good for us and good for Brazilian football”, he said.

Beyond sponsorships and advertising, another key area of ongoing regulatory uncertainty is whether Brazil will choose to offer a limited number of sports-betting concessions to the highest bidders, or instead turn to an open licensing model with an unlimited number of authorisations available for qualified operators.

The former approach would be much better both for operators and for the government, Thomas Carvalhães, Brazil director for Hero Gaming, and Neil Montgomery, a gambling lawyer based in São Paulo, both told SBC delegates.

Montgomery said a licensing model “ticks all the boxes”, providing more competition for consumers, less risk of litigation from unsuccessful applicants, and a concession process would be very tricky to execute in time for the Qatar World Cup.

A regulatory regime for sports betting is just one of at least three fronts for gambling expansion in Brazil, as the country’s 26 state governments continue to exploit a seminal Supreme Court last year allowing state and municipal lotteries, while Congress reviews broader legislation.

There is good reason to be optimistic that a new working group formed in Brazil’s Chamber of Deputies will finally lead to the passage of long-stalled legislation for casinos, bingo halls and numerous other gambling verticals, said Magnho Jose, president of the Legal Gaming Institute that is lobbying for expanded gambling.

Betsson’s Gelfi said it was hard to predict what will happen in Congress but Brazil’s obvious need for new revenue sources post-pandemic means it is “possible that this project gets to the top of the agenda to be voted on in the short- to medium-term.”

“Of course this is not a smooth process,” said Gelfi, noting opposition from evangelical groups in particular, “but it seems to be gaining traction on a daily basis.”

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