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From Sports Betting to Online Gaming: Brief Summary of Brazil’s Bill of Law Approved by the House of Representatives

On 13 September 2023, Brazil’s House of Representatives introduced some relevant changes in the Brazilian betting landscape. Bill of Law nr. 3.626/23, which incorporates some rules outlined in Provisional Measure nr. 1.182/2023 concerning this subject and changes some provisions of the Federal Law nr. 13.756/2018, has been approved by the House of Representatives and will now proceed to the Senate for further deliberation. In this context, the Bill not only partially regulates “fixed-odds sports betting”, but also expands the legislative scope to include the category of “online gaming”, as outlined in articles 2 and 3.

According to its wording, “online gaming” is defined as an “electronic channel that enables virtual betting in a game in which the outcome is determined by the outcome of a future uncertain event, from a random generator of numbers, symbols, figures or objects defined in the system of rules”. This inclusion is particularly relevant when compared to previous legislative acts, which focused exclusively on fixed-odds sports betting. Such expansion not only redefines what can be considered a lawful betting activity in the country, but also raises questions about what games could be classified as “fixed-odds online games”. In this regard, the Ministry of Economy (“the Regulator”) will provide clarity on the subject through subsequent administrative acts.

Therefore, the main points of the Bill of Law are the following:

  1. Legal Requirements for Operators:

Establishment in Brazil: Operators are required to legally establish a company in Brazilian territory. 

License Fee: The license fee is capped at BRL 30,000,000.00 (thirty million Brazilian Reais) and must be paid within 30 days after the application’s approval – it’s important to note that the specific technical, operational, corporate, and financial requirements for obtaining the license will be defined in subsequent acts by the Regulator.

License Characteristics: The license is non-transferable, non-negotiable, and has a validity period of three years.

Corporate Control: In case of changes in corporate control (including mergers, splits and incorporation), the license may be reviewed.

Supervision Fee: Operators will have to pay a monthly “Supervision Fee” that varies according to the monthly winnings distributed to their users, as stipulated in the Annex attached to Federal Law nr. 13,756/18.

Sports Integrity and Match-fixing Prevention: Mechanisms must be implemented to ensure the integrity of bets and to prevent match-fixing.

AML Policies: Operators must follow strict procedures mandated by law to prevent activities such as money laundering, terrorism financing, and the proliferation of weapons of mass destruction.

Responsible Gambling: The establishment of responsible gambling policies and measures to prevent pathological gambling disorders are required.

Prohibitions: Practices such as granting advantages as incentives for bets are prohibited (bonuses may be interpreted as such).

  1. Taxation

 

Operators: The Bill of Law maintained the taxation defined in Provisional Measure nr. 1,182/23, setting it at 18% on the Gross Gaming Revenue (GGR) of operators. However, it is important to note that this will not be the only tax that licensed operators will have to pay in Brazil. There will be other applicable taxes (including federal and state taxes), which could surpass an overall 30% tax rate – depending on the state the company is established.

Bettors: The taxation on prizes/winnings of bettors is also unchanged. The legislation provides a tax exemption for bettors whose winnings (on each bet) do not exceed the exemption limit for Individual Income Tax (IRPF), currently set at BRL 2,112 (two thousand one hundred and twelve Brazilian Reais). If this amount is exceeded in each prize received, the bettor will be taxed at 30% on such winnings.

  • Advertising and Marketing

 

General Guidelines: The Bill addresses the creation of a set of rules for advertising, the details of which will be defined by future administrative acts. 

Warnings and Awareness: All marketing campaigns must include warnings about the risks associated with betting and promote responsible gambling.

Time and Channel Restrictions: Limitations will be imposed on the times and channels where advertising can be broadcasted to safeguard minors.

  1. Restrictions

Broadcasting Rights: The Bill of Law also restricts the possibility of betting operators and their controllers to purchase, license, or finance the acquisition of broadcasting rights of sports events conducted within the country. 

The Fight against the ‘Grey Market’: Three key measures will be implemented in Brazil in order to prevent unlicensed operators to exploit the Brazilian market: (i) banning advertising, marketing activations or sponsorships by unlicensed operators within the country, (ii) blocking IPs (Internet Protocols) of unlicensed operators, and (iii) prohibiting PSPs (Payment Service Providers) to provide payment services in favor of unlicensed operators.

Our legal team at Bichara and Motta Advogados are attentively monitoring the regulation of the betting industry in Brazil, offering legal advice to multiple market participants. For further information, please visit: www.bicharaemotta.com.br