Every year, iGaming experts anticipate changes in the industry's global landscape as newly regulated markets create great opportunities for both established providers and young operators. The legalisation of sports betting in Brazil in 2018 is one such case. Once the new regulations and licensing process are implemented, operators will have to meet a colossal demand – and not just by Latin American standards.
Brazil is often called a "sleeping giant" due to its immense technological and economic potential. It's the only Portuguese-speaking country in the Americas and the most populous one in the world; with 213 million people, it simply dwarfs Angola and Portugal.
A little-known fact: Brazil used to have a thriving casino industry in the past. Rio attracted many in the 1920s and 1930s with its luxurious casinos built in a style reminiscent of the French Riviera. Unpopular with society's religious and conservative parts, the industry was eventually banned in 1946 by presidential decree. The new law came into force practically overnight, giving entrepreneurs and employees no time to prepare.
However, there were some exceptions to this ban. Horserace betting remained available under a government monopoly, and poker was never prohibited as it was considered a game of skill rather than a form of gambling.
Bingo remained legal for a long time due to a technicality, but it was banned in 2004 when Provisional Measure 168 closed the legal loophole in question.
The lottery was legalised in 1969 and is provided by Caixa, a company affiliated with the Ministry of Finance.
Obviously, online gambling wasn't explicitly mentioned in the 1946 decree; nonetheless, it's considered subject to the blanket ban. It has to be noted that there is some ambiguity in the relationship between international actors and Brazilian law. The Penal Contraventions Act only applies to activities that occur within Brazil's borders, so it's debatable whether foreign-based operators providing online gambling services in the country without a physical presence are affected. The casual betting app Wanna, which focuses on the Brazilian market since 2020, operates precisely in this grey area.
Still, the Brazilian Internet Legal Framework — a law passed in 2014 — technically allows authorities to block and fine operators that collect data or communicate through internet service providers in Brazil.
The stars are aligning
The status quo in Brazil recently shifted, and attitudes towards gambling changed. Sports betting was legalized back in 2018, and regulations are soon to be implemented. Brazil truly has everything it needs to become a new iGaming hotspot.
With almost twice the population of second-ranked Mexico, Brazil is the most populous country in Latin America. A market of this size opening up is a huge sensation, and not only for established operators: smaller local and international companies have a fantastic opportunity to carve their own space.
Digitalization trends are also very promising: internet penetration stands at 75% (compared to 65% in 2018) and there are 96 cellular subscriptions per 100 people. The country is very urbanized: 87.2% of Brazilians live in metropolitan areas, meaning that access to key communication infrastructures is widespread.
Since the pandemic hit, Brazilians came to rely more and more on their mobile phones for their shopping, leisure, and financial needs. According to a mobile trend report from App Annie, last year's 184 million downloads of payment and financial apps represent a 125% growth compared to the year before – something that under normal circumstances would have required several years.
Additionally, Brazil leads in daily mobile usage worldwide with 5.4 hours per user on average.
Another factor that contributes to the industry's expectations is the love of sports.
Football has a special place in the heart of many Brazilians. The country's national team is the most successful in FIFA competitions, having won the World Cup a record five times, and many all-time greats hail from Brazil.
The most famous example is Pelé (born Edson Arantes do Nascimento), a native of the state of Minas Gerais that many consider the best player to ever grace a football pitch.
On top of the World Cup, Brazil won the Copa América nine times and is generally a favourite in international competitions. Even in the absence of international tournaments, however, Brazilians get to enjoy lots of football: the best clubs in the country compete in the Brasileirão, the top domestic competition in Latin America, and the league system includes both federal and state championships.
Brazilians also love volleyball and Formula One racing; in recent years, mixed martial arts fights attracted lots of attention due to the influence of Brazilian jiu-jitsu (and, to a lesser extent, capoeira) on the sport.
Taxes and regulations
Despite the legalisation of sports betting in 2018, there is still no licensing process in place. The current legislation on fixed-odds betting is just part of the legislative framework, and there are lots of details still to be defined before the first formally legal bet can be placed.
The cost of an operator license isn't known yet, but there have been mentions of a monthly fee ranging between R$54,419 and R$1,944,000 (€9,000 - €320,000) depending on bets volume.
The law also mandates sharing part of the turnover with public services and sports entities, while putting a ceiling on the maximum net income for operators: 14% for retail betting, 8% for online.
While the new regulations are yet to be implemented, the legal framework is currently being amended. On 15 July 2021, wager tax rates were lowered from 3% to 0.05% for online services and from 6% to 0.1% for retail services. Unfortunately for players, a 30% tax on winnings above $500 remains in effect.
27 August, 2021
Latin America: The land of sleeping giants
In 2020, a landmark Supreme Court's resolution allowed the states to offer lottery products locally, creating plenty of partnership opportunities. For example, Betsson got a license to operate via the Rio Grande do Sul Jockey Club. The state of Paraíba launched a regulated version of the traditional betting game Jogo do Bicho; in Minas Gerais, the government proceeded to include sports betting into its existing lottery legislation to avoid waiting for a federal law.
Among others, the states of São Paulo and Maranhão passed laws to set up local lotteries; both Rio de Janeiro and the Federal District of Brasília commissioned a feasibility study to justify running a private lottery enterprise.
The legalization of casinos is also being discussed. Proponents see it as a way to boost tourism and raise much-needed tax revenue to recover from the effects of COVID-19. A vocal supporter is Senator Angelo Coronel, who claims that legalisation could net the country $9.3 billion and create 700,000 jobs; allegedly, even the Minister of Economy Paulo Guedes shares this opinion.
Integrated resort casinos were mentioned in the Tourism Law Bill, and the 2020 Integrated Resort Bill was specifically introduced to advance the conversation on the topic.
In all likelihood, the legalisation of other forms of gambling will depend on whether the sports betting experiment will bring net positive effects to the country. If betting results in substantial revenues for public entities, skeptics could possibly reconsider their stance.
The next big thing
Once the regulations are finalised and implemented, Brazil will likely become one of the world's hottest gambling markets. Of course, like in many other regions, the pandemic has complicated things; but even with the resulting delays, the market is expected to be in full swing by 2022 (by law, the Ministry of Finance has four years to develop a regulatory framework).
As always, Slotegrator is keeping an ear to the ground, and if you want to know more about opening an online sportsbook for Portuguese-speaking audiences, get in touch with our jurisdictional advisory specialists.