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GAMING AND BETTING IN BRAZIL

CURRENT STATUS OF LEGAL AND REGULATORY ENVIROMENT

2021 saw the 75th anniversary of the general ban of games of chance in Brazil1. The last roulette spin was played in the casino of the iconic Copacabana Palace Hotel on the night of 30th April 1946, when President Dutra issued a Decree-Law confirming the prohibition. Ever since, such general ban has been embedded in the controversial article 50 of the Criminal Contraventions Law, which defines games of chance as those where the result of the games relies exclusively or predominantly on luck and does not authorize them to be conducted in public venues or those accessible by the public, whether an entry is required or not. In the context of the foregoing, considering the internet as a public venue or one accessible by the public has attracted a lot of discussions, especially since hundreds of foreign online gaming and betting operators currently access the Brazilian market and accept bets from Brazilian punters. 


A conservative interpretation of the Criminal Contraventions Law would indeed consider the internet as satisfying the requirements for being deemed a public venue or one accessible by the public, especially as from 4th August 2015, when Federal Law No. 13,155/2015 amended paragraph 2 of Article 50 of the Brazilian Criminal Contraventions Law to specify that players betting online are equally subject to the payment of a fine. Currently, the only legal forms of authorised gambling in Brazil are:

  • State-run lottery (both at Federal and State level), including scratch cards;

  • Horse race betting at authorised racetracks;

  • Online or land-based fixed-odds sports betting (pending regulation to be issued in 2021, as promised by the Federal Government, subject to licensing).




 Horse race betting is allowed at authorised race tracks in Brazil 


It follows from the above that the deciding factor in ascertaining whether a game is considered to be one of chance in Brazil is the extent to which winning or losing depends on luck or skill. Whenever the outcome depends predominantly on skill (even if luck is a factor in the result), the game will not be considered gambling and, hence, will not be subject to the restrictions of the Criminal Contraventions Law.

Recognition of the distinction between games of skill and games of chance is increasingly present in Brazil nowadays. Skill games are generally referred to as “mind sports” (esportes da mente, in Portuguese). In this regard, the Brazilian Federal Government recently approved the Brazilian Chess Association for the Visually Impaired, the Confederation of Texas Hold’em, and the Brazilian Bridge Federation, recognizing that such games are sports.



 The Brazilian Federal Government recognizes Chess as a sport.



In the context of the above, there are two main bills seeking to legalize all forms of gambling in Brazil, one proposed in the Senate and the other in the House of Representatives. Neither bill has yet been approved by the house where they have been respectively proposed:

House of Representatives Bill of Law No. 442/1991

  • Seeks to legalize various forms of gambling, both online and land-based.

  • Registry for gambling addicts will be put into place and an individual will be included either by choice or judicial order. Such persons cannot gamble.

  • Licensed entities must be:

  • Incorporated under Brazilian law, with headquarters and management in the country;

  • Technically capable of conducting the activity; and

  •  Financially and economically credible.


  • Shareholders/managers must also provide documents such as income tax returns and clearance certificates, have no criminal precedents, etc.

  • Servers for online gaming operators must be located in Brazil.

  • Land-based casinos: the number of establishments per state varies between one and three and is based on the number of inhabitants of each state. Based on the current population of each State:

  • São Paulo could have up to 3 casinos.

  • Rio de Janeiro, Minas Gerais and Bahia could have up to 2 casinos each.

  • Other Brazilian states could have 1 casino each.

  • This limit would not apply to hydro-mineral resorts where casinos have previously been operated (i.e., certain cities in the State of Minas Gerais).

  • No group may be granted two licenses in the same state, nor more than 5 licenses in the country. Licenses will be granted for 30 years, renewable for another 30 years.

  • Senate Bill of Law No. 186/2014

  • Seeks to legalize various forms of gambling, both online and land-based.

  • Providers must comply with Central Bank rules regarding:

  • Identification of players.

  • Communication of financial transactions.

  • Keeping of records.

The first concrete development towards the legalization of gaming and betting came at the end of 2018, with the enactment of Federal Law No. 13,756/2018, legalizing fixed-odds sports betting, both land-based and online. The law defines fixed-odds sports betting as a lottery modality consisting of a betting system related to real sports-themed events (and, therefore, in principle, not to electronic sporting events), in which how much the punter can win if his/her prediction is correct is defined at the time the bet is placed. 

At the end of 2020, the Brazilian regulator (SECAP – a division of the Ministry of the Economy) announced plans to roll out regulations for fixed-odds sports betting by July 2021, a promise which was not honoured.


In its latest draft decree released last year, SECAP opted for the concession licensing model out of the three possible approaches (being the other two approaches: authorization licensing [which would entail an unlimited number of licenses] or monopoly licensing). Under the concession model, operators will have to bid competitively against each other to "win" one of the few licenses limited in number. Initially, it was expected that no more than 30 operators would be able to function in Brazil at any one time. 


However, the latest rumors indicate that the total of available licenses should be between 50 and 100. But considering that approximately 500 foreign sportsbooks are believed to be currently operating in Brazil's market, even this increased number of licenses may not be sufficient. 


However, there is still hope this wind may change direction. Sixty-six companies responded to a recent Request for Information issued by Brazil’s National Economic and Social Development Bank (BNDES) and thirty-eight were selected to receive a Request for Proposal to select a company or consortium of companies to assist BNDES in structuring the industry for fixed-odds sports betting in Brazil, which would include working with SECAP in defining the most appropriate business model and legal framework. The news is that the qualifying applicants had not yet received such RFPs by mid-July and this is the reason why SECAP could not honor its promise to roll out the regulations. This may now happen in the months to come.


Besides not defining the licensing model for fixed-odds sports betting in Brazil, Law No. 13,756/2018 was also greatly criticized by the industry for contemplating a turnover tax (3% for online operations and 6% for land-based operations), in addition to the taxes usually paid by companies operating in Brazil.


Fortunately, this changed in July 2021 when Law No. 13,756/2018, by means of an Amendment to Provisional Measure No. 1,034/2021, which was converted into Law No. 14,183/2021, whereby Gross Gaming Revenue (GGR), rather than total revenue/turnover, became the basis for calculating the additional tax paid by licensed operators.


ARTICLE CONTINUED HERE




Dates Sep 15, 2021

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