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As nationwide sports-betting regulation flounders, Brazilian states are taking advantage, with the state lottery of Rio de Janeiro issuing its first sports-betting licence this week.
The announcement by Rio's state lottery on Monday (May 29) makes São Paulo-based Rede Loto the first operator to receive a state accreditation for sports betting in the entire country of Brazil.
The move comes as sports betting advances in several other states while federal legislation remains delayed.
Federal government officials and congressional leaders continue to discuss whether to legislate sports betting on a national level through a so-called provisional measure emergency decree, which only recently was considered to be imminent after a draft was publicly circulated to the industry and media.
A regular bill with an urgency requirement to address the issue is now being strongly considered instead.
The provisional measure would have taken effect immediately, but Congress would have had an additional 120 days to approve it. An urgency bill, by contrast, would take 90 days to be approved in Congress, but does not take effect until it is ratified.
Luiz Felipe Maia, a gambling law expert and founding partner at law firm Maia Yoshiyasu in São Paulo, said that there would be no licences for quite some time on a federal level.
“On the other hand, we’re going to have licences in Rio, in Paraná, in Paraíba. That's going to be a very complicated situation for the government. Because on the state level, things are moving quite quickly,” Maia told VIXIO GamblingCompliance.
The accreditation granted to Rede Loto allows the company to operate fixed-odds sports betting within the state of Rio de Janeiro through an initial five-year term. Rede Loto paid an upfront fixed grant of R$5m (approximately US$1m) for the privilege.
Similar systems have been proposed in the states of both Paraná and Paraiba, while other Brazilian state lotteries, including in populous Minas Gerais, are launching sports-betting operations through exclusive agreements with chosen technology partners.
The leaked draft of the provisional measure would have addressed this issue of state-level operations by specifying that players had to be located in the state itself to play online sports lottery games. In addition, states would have been forbidden from creating multi-jurisdictional lottery operations.
The state of Rio de Janeiro does not pose the competition to federal licensing that it would like to, according to gaming lawyer Udo Seckelmann, who practises at the firm of Bichara & Motta.
He told VIXIO that the payments platform that accredited operators will be required to use charges a hefty transaction fee for every deposit and withdrawal, which on top of taxes and licensing fees, is unappealing to the operators he has spoken to.
Meanwhile, the state of Paraná, home to 11m Brazilians, launched its tender process for sports-betting licences two weeks ago on May 19. Accredited companies must operate at least five brick-and-mortar locations and pay a R$5m licensing fee, in addition to 1 percent of monthly gross revenue and other fees.
Seckelmann’s caution extends beyond Rio to Paraná and the state lottery licensing system as a whole.
“The federal regulation will establish some measures to be adopted to prevent the grey market from offering games to Brazilian residents, with the blocking of IPs and the restriction of payment providers for unlicensed operators, and the prohibition of the advertising in Brazil by unlicensed operators,” he said.
“This will not be something that the states would fight against. So the big question is: Would it be smart to get a licence in Rio de Janeiro, which will be restricted to the limits of the region?"
