Awakening the Giant: an overview of Brazilian gambling regulations 2024
Every year, iGaming experts anticipate changes in the industry's global landscape as newly regulated markets create great opportunities for both established operators and newcomers. The biggest story by far of 2023 is the regulation of sports betting in Brazil, which has become one of the world’s biggest regulated markets. Learn all about the Latin Giant here.
Long known as one of Latin America’s “sleeping giants” due to its immense size (214 million people and counting) and robust, growing economy, Brazil’s turn in the iGaming spotlight is much deserved.
A little-known fact: Brazil used to have a thriving casino industry. Rio attracted visitors from around the world in the 1920s and 1930s with its luxurious casinos built in a style reminiscent of the French Riviera. However, gambling was deeply unpopular with religious and conservative Brazilians (of which there were many), and 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 one of chance.
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 legalized 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 has focused on the Brazilian market since 2020, operates in precisely this gray area.
Still, the Brazilian Internet Legal Framework — a law passed in 2014 — allows authorities to block and fine operators that collect data or communicate through internet service providers in Brazil.
The stars align
But public opinion fluctuates, and attitudes towards gambling have changed. Sports betting was legalized back in 2018, and new regulations were signed in 2023. With a massive population, a national passion for sports, and widespread internet connectivity, Brazil has everything and iGaming hotspot needs.
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 out their own space.
The telecommunications infrastructure is digitalizing fast. Internet penetration in 2023 stands at 84.3%, compared to 65% in 2018. Moreover, there are 221.0 million cellular mobile connections (102.4 percent of the total population). The key to the country’s connectivity might be how urbanized its population is; 87.5% of Brazilians live in metropolitan areas. Since the pandemic hit, Brazilians have come 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, the financial sector continued to experience positive growth in the use of mobile apps throughout 2022. Payment and financial apps saw 102 million downloads, a 22.8% growth compared to the year before.
Additionally, Brazil leads in daily mobile usage worldwide, with 5.3 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 hearts 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 favorite 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
While a law legalizing sports betting was passed in 2018, delays meant Brazilian punters had to wait five years for full regulations, which only came about through a provisional measure passed (with several amendments) in July 2023.
Overall, the changes of the previous draft consist of an increase in the gross gambling revenue tax, more comprehensive marketing restrictions, and a higher license fee.
The most significant change is the rise in tax on revenue for sports betting operators. In order to increase the revenues flowing to the Ministry of Sports from 1% to 3%, the tax has been raised from 16% to 18%. Unfortunately for players, a 30% tax on winnings above R$500 remains in effect.
Although the cost of an operator license was not explicitly addressed in the Prime Minister's revisions, reports indicate that it is expected to increase to R$30 million ($6.35 million) from the previously established R$22.2 million.
Another new introduction was the establishment of the National Secretariat for Games and Betting (SNJA). This committee will be responsible for all the procedures related to sports betting regulating and licensing.
The amendments also included advertising restrictions. Operators must promote responsible gambling, and are prohibited from obtaining sports broadcast rights. The legislation establishes a self-regulatory system, with betting businesses expected to adhere to the standards set by the National Council for Advertising Self-Regulation (CONAR).
However, there is some good news as well. The PM's revisions now clearly permit foreign operators to apply for a license, which was less evident in the initial regulations.
Unsurprisingly, the changes were not well-received. The tax rate is higher than in previous drafts; after factoring in all additional taxes, operators will be required to pay a 30.82% tax on gross gaming revenue (GGR).
Moreover, operators are expressing concerns about how the Central Bank will handle sports betting operations and whether it will have any impact on poker operations in the future. Another concern is the unclear regulations regarding market entry.
The law’s strict penalties for unregistered betting platforms have been a cause for concern. Many bookmakers have long operated in the gray market, and fear the window between when the rules go into effect and when they’ll be able to actually acquire a license could leave them exposed to legal action if they continue operating during that time.
The regulation of sports betting has opened the door to discussions around other kinds of gambling.
Some members of Congress see sports betting regulation as an initial step towards potentially legalizing various forms of gambling in Brazil, including casinos, bingo, and jogo do bicho. Moreover, in a recent interview, the president of the Senate, Rodrigo Pacheco, suggested that legalizing and regulating gambling and sports betting could present a "path to sustainable revenue" in Brazil.
Previously, in 2020, a landmark Supreme Court resolution allowed the states to offer lottery products locally, creating plenty of partnership opportunities. For example, Betsson acquired 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. 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 a possibility. Proponents see it as a way to boost tourism and raise much-needed tax revenue to recover from the effects of the pandemic. One vocal supporter is Senator Angelo Coronel, who claims that legalization could net the country R$9.3 billion and create 700,000 jobs; allegedly, even the Minister of Economy Paulo Guedes shares this opinion. In addition, Deputy Felipe Carreras, the rapporteur for the project in the Chamber, estimates that the regulation of gambling could result in an annual revenue collection of R$20 billion.
In all likelihood, the legalization 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
In 2023, Brazil took a big step in the development of its gambling industry, and there might be more to come.
With the establishment of new sports betting regulations, Brazil is one of the world's hottest gambling markets. The recent regulation of sports betting has sparked interest in the regulation of other gambling verticals. Politicians and government agencies are increasingly discussing the positive impact that gambling can have on the economy and tourism. In short, all signs point to a promising future for iGaming in Brazil.
To make the most of the amazing opportunity that Brazil presents, contact us today for a free consultation to learn how our platform technology or jurisdictional advisory services can launch your iGaming business.
