Senate Bill Requires Brazilian Investment In Online Operators

November 22, 2023
Back
A key senator has released an updated version of legislation to regulate online betting and casino games in Brazil, with a six-month transition period now proposed for offshore operators who could only obtain a licence if they have local investment partners.
Body

A key senator has released an updated version of legislation to regulate online betting and casino games in Brazil, with a six-month transition period now proposed for offshore operators who could only obtain a licence if they have local investment partners.

An eagerly anticipated version of Bill PL 3626/2023 was presented on Tuesday (November 21) to a Senate committee on economic affairs by the bill’s rapporteur, Senator Angelo Coronel of Bahia state, following weeks of negotiations with congressional leaders and senior officials in the government of President Luiz Inácio Lula da Silva. 

The committee delayed a scheduled vote on the updated bill, however, as members were granted at least 24 hours to review the significant changes that are now set to be made to the bill, which has already been approved by the lower house of Brazil’s Congress and by a separate Senate committee on sport. 

Unlike the sports committee’s version, Coronel is proposing to retain provisions in the bill to allow operators to offer online casino gaming in addition to sports betting. 

Coronel’s 44-page report on the bill also suggests reducing a headline tax rate of 18 percent of gross gaming revenue (GGR) to 12 percent. Once additional social security and local taxes are applied, the effective overall rate would be around 23 to 26 percent of GGR instead of roughly 30 percent. 

As anticipated, the new version of the bill would also replace a 30 percent tax on all betting winnings above a baseline amount with a 15 percent rate on bettors’ annual net winnings. 

In further welcome news for operators, Coronel’s closely-watched proposal adds a transition period of at least six months for current offshore operators to adjust to the new regime, subject to conditions that would be set by the Ministry of Finance.

Brazilian Partners Required

If those features of the bill all make pleasant reading for operators eagerly anticipating a regulated market in Brazil, other provisions appear to be more problematic.

One amendment added by Coronel would require any licence applicant to have a Brazilian investment partner that owns at least 20 percent of the operation.

Presenting his report to the economic affairs committee, Coronel said the amendment, which had been rumoured for several weeks, was designed to provide an “incentive for the participation of Brazilian companies [and] guarantee the participation of Brazilian investors in the composition of companies that may operate in the sector.”

During a committee hearing lasting several hours, Coronel was forced to acknowledge opposition among his Senate colleagues to online casino games being regulated alongside fixed-odds betting on sports events.

Still, Coronel insisted he had spoken with almost every senator about online gaming, and a majority of them were in favour of legalising a vertical expected to generate up to 80 percent of total tax revenue.

“We cannot have a minority overrule the majority,” the Bahia senator said.

Coronel’s proposal also contains a series of further amendments to the version of PL 3626/2023 that was approved by the Chamber of Deputies in September.

Among them:

  • Establishing a maximum upfront licence fee of R$30m (approximately US$6m) rather than setting the fee at that amount, while extending the licence term from three to five years and allowing operators to deploy up to three brands or skins.
  • Requiring all bets to be registered by an entity authorised by the Central Bank of Brazil (BCB). This is in addition to deposits and withdrawals being processed exclusively by payments companies previously authorised by the BCB.
  • Requiring use of facial recognition technologies to verify the identity of bettors.
  • Enabling Brazilian national lottery operator Caixa Econômica Federal to obtain a licence for fixed-odds betting and allowing lottery retailers to offer in-person wagers in their outlets.

Another key area addressed by Coronel’s version of the bill, but not in earlier iterations, is the hot-button issue of Brazilian state governments either operating or issuing local licences for online betting and other games.

Through the new bill, states could only authorise fixed-odds betting within their jurisdictions through regulations that are aligned with federal laws, with limited exemptions for any authorisations that were issued through licensing processes that began prior to August 2023.

All state-sanctioned online betting transactions would also have to be limited to players physically located within the borders of the applicable state, ruling out the plans of Rio de Janeiro’s state lottery to enable its local licensees to accept bets from across Brazil.

Advertising of state-licensed operations also would have to be restricted to persons physically located within that jurisdiction, while no company could be authorised to operate in more than one Brazilian state.

Next Steps In Senate

Amid protests from some anti-gambling members, the Senate economic affairs committee chairman agreed on Tuesday to delay a vote on Coronel’s report for 24 hours, giving senators more time to review the proposed amendments to the legislation. 

Nevertheless, several senators complained at the plan to vote on the bill as soon as later today (November 22), calling instead for further public hearings, closer coordination with the Senate sports committee on key issues, including advertising restrictions, and at least a full week to review the updated legislation that is no longer a government urgency bill requiring fast-tracked approval.

Once passed by the economic affairs committee, Bill PL 3626/2023 would be eligible to receive a final vote by all senators on the Senate floor — in theory as soon as later on Wednesday.

The bill would then have to go back to Chamber of Deputies to either accept or reject amendments adopted by the Senate, before being sent to President Lula to sign into law.

Coronel acknowledged to fellow senators on Tuesday that online betting was a “controversial subject where it is difficult to arrive at a consensus.”

But he said his version of the bill had been drafted in close consultation with government officials and with Chamber of Deputies leaders, specifically to ensure that Senate amendments are not then rejected by the lower house or by Lula. 

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

To find out more about Vixio, contact us today
No items found.