Brazil's Fantasy Sports Sector Seeking Legal Clarity From Congress

October 25, 2022
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Brazil’s nascent fantasy sports industry is lauding last week’s approval of a bill to establish a legal framework for electronic video games that would also formally recognise fantasy competitions as games of skill.

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Brazil’s nascent fantasy sports industry is lauding last week’s approval of a bill to establish a legal framework for electronic video games that would also formally recognise fantasy competitions as games of skill.

Bill 2796/21 was approved on October 19 in the Chamber of Deputies and now faces scrutiny by the Senate before potentially being signed into law.

The measure, introduced last year, did not initially include fantasy sports. However, the bill’s rapporteur, deputy Darci de Matos, included provisions related to fantasy contests in the text at the last minute.

According to Brazilian fantasy sports proponents, it is long past due for fantasy sports to be recognised by law as a game of skill, as courts have previously held.

“We congratulate the Chamber for understanding that we are a structured and consolidated sector as an economic activity, with great potential for growth,” Rafael Marchetti Marcondes, president of the Brazilian Association of Fantasy Sports (ABFS), said in a statement provided to Brazilian media.

“We are sure that the regulation brought about by the legal framework will increase investments in our industry, which has always wanted to operate within an environment of legal certainty.”

Luiz Felipe Maia, gambling law expert and founding partner at Maia Yoshiyasu in Sao Paulo, said the inclusion of fantasy contests in the bill “makes a lot of sense”.

Although the bill would entitle fantasy sports providers to certain tax credits, “it’s even more relevant as a recognition of fantasy sports as a skill-based game than anything else”.

The Brazilian fantasy sports industry, according to the ABFS, generates R$70m per year, or approximately US$13.3m. The association said that the figure could become R$100bn (US$19bn) in the coming years with the right support.

Providers of fantasy sports contests in Brazil include daily fantasy start-up Rei do Pitaco, as well as the Grupo Globo media conglomerate and its Cartola product based on Brazilian football. Last year, Globo announced a partnership with Flutter’s FanDuel to provide daily fantasy sports services for an express version of the game.

Fantasy sports counts upon a different legal underpinning to sports betting, which has been authorised as a lottery game but is still awaiting full regulation by the Brazilian government.

“Keep in mind that in Brazil, our legal system is not built around the definition of gambling, but instead it's built around the definition of games of chance. So if skill is the dominant factor, it's a different treatment,” Maia said.

Fantasy contests are therefore treated as a game of skill like poker and chess.

“As electronic skill-based games, they are under the same category as esports,” Maia said. “And in the Brazilian tax system, there is a principle called Isonomy Principle which states that if taxpayers are going to have similar characteristics, then they must be treated the same and they must pay the same taxes.”

Those taxes include a federal tax credit for minimum expenditures toward game development, which can later be used as a tax deduction.

So although sports betting remains unregulated with a fast approaching deadline, online fantasy sports, if the bill is approved, will get the same tax break afforded to other e-gaming developers named in the bill’s text.

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