High Fees, Limited Licensing In Draft Decree For Brazil Sports Betting

May 3, 2022
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President Jair Bolsonaro will reportedly sign a regulatory decree for sports betting within the next week that is expected to set an upfront licensing fee of more than US$4m and allow for a restricted number of operators for at least the first year.

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President Jair Bolsonaro will reportedly sign a regulatory decree for sports betting within the next week that is expected to set an upfront licensing fee of more than US$4m and allow for a restricted number of operators for at least the first year.

Brazilian publication Metrópoles reported on Saturday (April 30) that Bolsonaro should approve the long-awaited decree to implement a December 2018 sports-betting law “by the 10th day of May.”

If that occurs as expected, it will end a period of limbo for international sports-betting operators that are eagerly anticipating the formal opening of the Brazilian market and hoping it occurs before November’s FIFA World Cup.

But there will also likely be a series of new questions around how many operators will be able to enter the market, based on a recent draft version of the decree seen by VIXIO GamblingCompliance.

Under the draft decree, which is understood to have been approved by senior officials in the economy ministry but is still awaiting final sign-off by the minister and the President, fixed-odds sports betting would be subject to an authorisation or open licensing framework, rather than a concession model that would limit the number of licenses.

Still, the draft decree would also empower officials in the economy ministry to restrict the number of authorisations for the first 12 months after the decree takes effect.

Five-year licenses would also be subject to a fee of R$22.2m, or approximately US$4.4m, which in itself could limit the market to wealthier operators and prove a barrier to entry for various grey-market sportsbook brands already active in Brazil.

“Since it is a very expensive license and there may not be enough licenses available for all operators, the question that remains yet to be answered is how the Brazilian regulators will tackle the unlicensed offshore operators after the opening of the market,” Luiz Felipe Maia, partner with Maia Yoshiyzu in São Paulo, told VIXIO.

Under the draft decree, which could yet be amended, international operators could apply for authorisations only if they set up a Brazilian subsidiary with at least one legal representative, compliance officer, accountant and player representative based in the country.

Regulators would generally have a period of 30 days to analyse applications and then 60 days to award a license, but both of those periods can be extended to 60 and 120 days during the first year after the decree is published.

The economy ministry would be required to publish secondary regulations with more detailed rules within 120 days of the initial decree’s publication.

However, officials would also be able to wave regulatory requirements for operators selected to participate in a “regulatory sandbox” under a temporary license “in order to develop innovative business models and test experimental technologies”, similar to a scheme already in place for Brazilian payments and fintech companies.

The ministry would define the criteria for selection of sportsbook operators for the sandbox, as well as the duration and other rules applicable to the program.

Under the draft decree, existing operators active in Brazil would be granted a period of least six months to transition to the legal market — a period that could extend to the start of the World Cup in Qatar in November if the decree is indeed signed within the next week or so.

The Central Bank of Brazil would also be required to establish rules to prevent Brazilian financial institutions from authorizing any credit, debit card or other electronic payments for unlicensed operators.

Although the decree offers few specific details for retail sports wagering, it would prohibit anonymous bets in physical locations as all sports bettors would have to be identified.

Bets would seemingly be allowed on esports as well as traditional sports, but regulators would retain the authority to prohibit betting on certain events and wagering on youth sports would be expressly prohibited.

The draft decree would apply standard restrictions on advertising, including a ban on any misleading ads or those that link betting to financial success, with no watershed or other more onerous provisions in place in certain European countries.

Regulatory Overhaul, Senate President On Gambling Expansion

Alongside news of the sports-betting decree, Metrópoles also reported on Saturday that a key official for lotteries in the economy ministry would be imminently moving to another role within the government.

Waldir Eustáquio Marques Jr has been a lottery official since 2007 and is understood to have been the principal author of the sports-betting decree. He will now become assistant to Brazil’s secretary of competition as part of a reshuffling of the economy ministry, Metrópoles reported.

The publication said Waldir Jr. would be replaced in his policy role for lotteries and sports betting by Iluri Ribeiro Castro, a former official at Brazilian public bank and national lottery operator Caixa Econômica Federal.

The implementing decree for fixed-odds sports betting had earlier this year been considered to be imminent, but with each passing week doubts had grown that the regulated market would be able to launch in time for the World Cup.

Another senior economy ministry official offered few clues as to the timeline for the decree when speaking on an April 6 webinar on the regulation of sports betting hosted by the Brazilian Bar Association.

Wesley Cardia, secretary for partnerships at the ministry, said only that a decree would be released “within the coming months” and that whether licenses should be limited was one of a number of key issues to be considered.

Cardia did say that there would be a transitional period for offshore operators, as it “does not make sense to exclude those that have created the market while they wait for their licenses.”

“We are working hard on the best regulation possible,” he added.

The process to regulate the 2018 sports-betting law is separate to broader legislation passed by the lower house of Brazil’s Congress in late February that would also regulate online casino gaming, as well as land-based casino-resorts and bingo halls.

That bill is now pending in the Senate where it faces no shortage of opposition from conservative lawmakers and has yet to be assigned to committee.

Still, Senate President Rodrigo Pacheco last week met with the bill’s author in the Chamber of Deputies and said that it could be brought up for a vote in the full Senate before the end of this year, depending on how debate progresses, according to Metrópoles.

Pacheco noted that Bill 442/1992 is not the only expanded gambling bill pending in the Senate, adding: “I do not rule out the possibility of 2022, but I can’t guarantee it.”

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