Lula Launches New Era In Brazil Online Gambling

January 2, 2024
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A new era for gambling in Brazil began on December 30 when President Luiz Inácio Lula da Silva signed a law to regulate online gaming and sports betting, shifting the focus to Lula’s Ministry of Finance to implement the landmark legislation over the early months of 2024.

A new era for gambling in Brazil began on December 30 when President Luiz Inácio Lula da Silva signed a law to regulate online gaming and sports betting, shifting the focus to Lula’s Ministry of Finance to implement the landmark legislation over the early months of 2024.




President Lula converted Bill PL 3626/2023 into Law 14.790 just a few hours before New Year's Eve, and a little over a week after the closely watched bill was approved by the Chamber of Deputies in one of its final acts before a Christmas congressional recess.




Lula did exercise his power to veto a handful of articles of the new law, including several relating to how player winnings from sports bets and online casino games will be taxed in the regulated market.




Specifically, Lula chose to veto three articles that previously would have applied a 15 percent winnings tax to players’ annual net winnings and exempted any winnings below a federal income tax threshold of R$2,112, or roughly US$435.




As a result, it appears that all winnings from online betting and gaming will be subject to a 15 percent tax, regardless of the amount, although it is not entirely clear whether bettors may still be able to offset losses against taxable winnings.




In a veto message, the President said the Ministry of Finance had advised that the prior language would “give rise to an income tax treatment distinct from those applied for other lottery games, resulting in a discrepancy in taxation without any justification”.




Per Brazilian law, the Chamber of Deputies and Senate will now jointly decide whether to accept Lula’s veto of the previous winnings tax structure, or instead override the President and impose the original language.




Lula’s partial veto does not affect any other portions of the law, however, meaning a licensing regime for online betting and gaming will take effect as per the legislation approved in Congress.




In a statement welcoming Law 14.790, Brazilian betting association IBJR said the legislation signed by President Lula was “in line with global best practices, ensuring that domestic and international investors will begin, within the very first days of 2024, to make their plans to invest billions in the country”.




“Nonetheless, IBJR is concerned at the lack of definition regarding the basis and method for calculating income taxes to be applied to prizes paid to customers,” warned the group, whose members include bet365, Flutter and Entain, among others. 




“The association is immediately available to develop a sustainable framework for this issue alongside the responsible government agencies. A bad experience for the customer, both in terms of excessive taxation and a complex system of calculation, tends to quickly push consumers towards the black market.” 




Ministry of Finance In Focus 




With legislation now signed into law, Brazil’s Ministry of Finance is set to take centre stage in terms of instituting the licensing regime for sports betting and casino games, which will see an unlimited number of licences being made available subject to an upfront fee of up to R$30m (US$6.2m).




The new law calls in at least 25 places for the Ministry of Finance to address a diverse range of issues via its implementing regulations, covering such topics as the terms of a minimum six-month transition period for current offshore operators active in Brazil, to how licensed operators will be able to use the images and other trademarks of athletes and Brazilian sports teams on their platforms.




In recent comments to the prominent Estadão newspaper, a senior advisor to the Ministry of Finance said the ministry was preparing to issue at least a dozen regulatory ordinances over the comings weeks to implement the new legislation.




Among other things, operators will be looking for those forthcoming regulations to address such key policy questions as whether an apparent ban on bonuses and other promotions outlined in Article 29 of Law 14.790 will be strictly applied, or whether there might be leeway to at least allow retention bonuses for current customers.




Another area in need of greater clarity is which types of online casino games will be permitted, as the law does not list any specific games and merely provides a broad definition of “virtual online gaming events” that may be subject to fixed-odds betting.




In a LinkedIn post following approval of PL 3626/2023, finance ministry special advisor José Francisco Manssur implied that games offering mystery or variable jackpots will not be allowed. The post was responding to mainstream media scrutiny of the online casino game Fortune Tiger, or “jogo de tigrinho”, which has been prominently promoted by Brazilian social-media influencers.




“No game will be permitted that does not clearly inform the bettor of the value of their prize if they win the bet,” Manssur wrote. “Slot machine games that use ‘jackpots’ for example, will not be permitted.”




Per Law 14.790, the implementing regulations must also map out compliance and enforcement processes, responsible gaming rules, advertising restrictions and anti-money laundering and sports integrity requirements.




In October, the Ministry of Finance published an initial ordinance mapping out licensing criteria for prospective operators. However, it is assumed that those rules also will have to be updated to align with the final terms of Law 14.790, which include a requirement for each licensed operator to be at least 20 percent owned by a Brazilian investor.




         

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