'Fixed-Odds' In Focus As Brazil Mulls Limits On Online Casino

January 25, 2024
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Legal experts are hoping to convince government officials that Brazil’s new online gambling law is broad enough to encompass a full range of online casino products, despite recent indications that certain popular games could be prohibited.
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Legal experts are hoping to convince government officials that Brazil’s new online gambling law is broad enough to encompass a full range of online casino products, despite recent indications that certain popular games could be prohibited.

Whether Law 14.790 accommodates online slots, crash games and live casinos has become a hot-button issue in the wake of a series of recent public comments from a chief advisor to Brazil’s Ministry of Finance that at least two prominent games — Fortune Tiger or “Jogo do Tigrinho”, and Aviator or “Jogo de Aviãozinho” — will not make the cut once the regulated market is established.

It is not entirely clear why those two specific games have been highlighted, but both have received recent mainstream media attention in Brazil and criticism over how they have been promoted by social media influencers on behalf of operators in the current offshore market.

The issue is far from a straightforward one based on the text of the law that was signed by President Lula on December 29.

Law 14.790 specifically authorises betting on “virtual online gaming events”, but also requires online games to fit squarely within a definition of a fixed-odds bet that involves a “multiplication factor of the amount bet to determine the amount to be received by the bettor, in the case of a prize, for each monetary unit wagered”.

Lawmakers were clear in their intentions to regulate online gaming, but by doing so under the umbrella of fixed-odds betting, “they ended up creating a kind of Frankenstein that could bring complications”, said Udo Seckelmann of Bichara e Motta law firm.

“At the end of the day, what is going to decide what will be included in the regulations will be the interpretation of the regulator,” Seckelmann said. “The regulator cannot go beyond what is in the law.”

Still, there is no reason why Law 14.790 should restrict the most popular types of online casino games from the Brazilian market, agreed Seckelmann and fellow lawyer Luiz Felipe Maia, who both spoke during a webinar hosted on Tuesday (January 23) by SBC Noticias Brasil.

Both online slots and crash games are still determined by fixed-odds as defined by the law, even if there are multiple potential outcomes or the odds change based on the duration of a game, said Maia, the founding partner of Maia Yoshiyasu Advogados law firm in São Paulo.

The odds for progressive jackpots are similarly fixed at the time the player places a bet, Maia said, although that issue may involve a political as well as a legal question as Brazil’s state-owned national lottery operator Caixa Econômica Federal has a vested interest in avoiding perceived competition from online casino games offering lottery-sized jackpots.

Industry advocates have met with officials from Brazil’s Ministry of Finance to share their interpretations of the law.

“Unfortunately, as of today, we don’t have an answer,” Maia said.

Forthcoming regulations should ideally offer clearer definitions of both online gaming and fixed-odds, and then “the operator can be creative within that regulatory framework,” he said.

But it would not make sense for regulators to be given “technical discretion to say I want this game, but not that game; I want ‘Game A’, but not ‘Game B’". 

“If ‘Game B’ fits within the concept, then it should be allowed.”

Two Interpretations Of Brazilian Investor Requirement

Legal definitions of permitted online casino games are not the only area of attention as Brazilian officials look to prepare a series of implementing rules under Law 14.790.

The Brazilian lawyers agreed that pre-existing lottery laws mean player winnings taxes should not be applied below a federal income-tax threshold of around US$435, even though provisions to expressly confirm that for fixed-odds bets were vetoed by President Lula as he enacted the online gambling bill.

Less clear, however, is exactly when the 15 percent winnings tax will be assessed and whether taxes will be subject to withholding by operators on behalf of players.

Fellipe Fraga, a lawyer and chief business officer with Brazil-facing operator Estrela.bet, said winnings tax was one of several areas where officials charged with implementing the new law should be wary of the consequences of any policy decisions that could “foment the unregulated market”.

Meanwhile, regulators face another key decision regarding the application of a statutory requirement for all operators applying for a licence to be at least 20 percent owned by a Brazilian.

Law 14.790 does not specify whether that strictly means a Brazilian person or whether the requirement could also be met by a legal entity, such as a registered Brazilian subsidiary company, said Seckelmann and Maia.

A requirement for each operator to have a Brazilian natural person as a shareholder is arguably unconstitutional, Maia told webinar attendees.

“Our concern, in the case of the more restrictive interpretation, is this could be challenged in court. And if it is challenged, we are running the risk of a legal ruling that suspends the whole process,” Maia said.

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