Brazil: White Sepulchres
We are already witnessing significant challenges that could pose substantial risks for the future of gaming and wagering in Brazil. These challenges include complex licensing regulations, high taxes, hefty license fees, the proliferation of the grey market and corruption.
Gambling has been illegal since 1946 when President Eurico Gaspar Dutra banned casinos and all gambling in Brazil (apart from state lotteries and horse racing). But that hasn’t stopped Brazilians from playing. According to a report published by the Brazilian Association of Financial and Capital Market Entities (ANBIMA) in May last year approximately 22.4 million Brazilians took part in online gambling, which is equivalent to approximately 14% of the population. Now after years of seemingly endless twists and turns, last minute delays and often acrimonious debate the Brazilian market is now finally open for business.
Legal challenges
In order to understand one of the main points of contention and how it could affect operators we need to go back to the beginning. The way sports betting was framed in the initial bill of 2018 and the subsequent four years during which former president Jair Bolsonaro adeptly avoided the issue has led to legal challenges which in turn could present problems for operators in certain states.
Bolsonaro had until December 2022 to finalise the process of regulating sports betting but missed the deadline so as not to alienate his evangelical base. According to the law enacted by his predecessor Law number 13,756 required the Ministry of Finance to promote the regulation of sports betting within a time limit of four years. However, it wasn’t until December 30, 2023 that President Lula promulgated Law 14,790. By then a number of states had already launched their own sports betting products. They were able to do so because Brazil’s Supreme Court (STF) had ruled that the federal government’s monopoly on lotteries was unconstitutional.
Sports betting had already been classified as a type of lottery under Law No. 13,756. The Rio de Janeiro State Lottery (Loterj) became the first state lottery to authorize online sports betting in Brazil. Crucially Loterj authorized online betting platforms to operate across Brazil. As a consequence, companies can apply for a licence in the state and operate nationally while paying less taxes and fees. This has led to a dispute between the STF and Loterj.
Loterj, argues that regulating the sports betting sector in its territory, was a necessary and legitimate response to the inaction of the Union itself, which allowed the deadline established in Law 13,756/2018 to elapse without due federal regulation. In a statement the lottery argued that “the eventual invalidation of the legal acts that accredited the companies would imply in million-dollar compensations, significant loss of tax revenue for or the Union itself, and the destabilisation of an entire regulated economic sector.”
In January, Minister André Mendonça of the STF ruled that Loterj and the State of Rio de Janeiro must cease accepting fixed-odds sports bets made from outside their jurisdiction. This decision has already significantly impacted several licensed operators who will now be required to adhere to the new regulation. Notably, sports betting platform Esportes da Sorte has established master sponsorship agreements with prominent football clubs, including Corinthians, Náutico, Ceará, and Bahia. Additionally, Pixbet serves as the main sponsor for the renowned Flamengo football club, while Betvip is a sponsor for Sport Recife.
In a piece published in Brazilian press Hazenclever Lopes Cançado, president of Loterj argued that while accredited operators have paid significant taxes, the Federal Government continues to create a hostile environment for them while allowing unlicensed international operators to flourish without paying taxes.
The illegal market
Lopes Cançado touches on a crucial issue here: Will the blocking of illegal platforms prove to be a Sisyphean task or to put it more bluntly turn out to become a case of whack a mole? To give an idea of just how big the problem is the Secretary of Prizes and Bets (SPA) in partnership with the National Telecommunications Agency (Anatel) blocked 9,600 illegal gambling sites between October 2024 and January 2025. The president of the National Telecommunications Agency Carlos Baigorri has gone on record stating that the country is fighting a losing battle when it comes to the blocking of illegal betting sites, as the regulatory agency alone does not have the means for effective and permanent closure of these sites.
The National Association of Games and Lotteries (ANJL) supported his concern in December stating that it had been in discussions with market operators, and had learned that more than two thousand illegal domains were fully operational in Brazil, in addition to the thousands that had already been taken down by Anatel.
“The continued operation of illegal sites— which engage in misleading advertisements, do not pay taxes, and offer no support or security for bettors—carries the dangerous potential to weaken the entire regulated environment and position Brazil as a pariah in the global betting market,” the organisation stated.
However different government departments and agencies are working to block access to these sites and the picture may not be as bleak as the ANJL makes out. In December, the SPA and ANATEL formalised an agreement to speed up and optimise ISP blocking. In addition, as of January 1, 2025, operators must have a website domain ending in “bet.br facilitating identification by users.
Furthermore, in a significant move to regulate the online gambling industry, Brazil has implemented strict measures against operators lacking the necessary licenses. Operators that do not have a license will face heavy sanctions according to Ordinance 1,233, published at the end of July, which includes a R$ 2 billion fine and a ban on applying for a license for up to 10 years.
Beyond fines and sanctions, Brazil may well have the upper hand in limiting the black market due to the popularity of the Pix payment method. In just three years, Brazil’s widely embraced Pix payment system has emerged as the leading payment method in the country, often displacing cash and wire transfers, and is currently used by 76.4 per cent of the population. Ordinances issued by the Ministry of Finance also include a requirement for player and operator accounts to be authorised by the Central Bank of Brazil. Crucially the government has officially announced that it is blocking payments made through Pix to illegal operators.
Taxation
Under the new regulatory framework, licensed operators must withhold a 15 per cent tax on player winnings that exceed R$2,824. Operators are also required to pay a 12 per cent tax on gross gaming revenue (GGR) with additional federal and local taxes bringing the total tax burden to approximately 25 per cent and pay R$30m for a licence. Although the cost of licences is steep and the overall tax rate is high compared to some jurisdictions the current outlook suggests that a liberalised market will be established in Brazil, resulting in a high rate of onshore channelling according to a report published by the International Betting Integrity Association.
However additional taxes could well be on the horizon. In July the working group on the regulation of tax reform in the Chamber of Deputies made changes to a “sin tax” already on the table and included new categories of products and services. According to the opinion of the deputies, electric cars and sports betting, fantasy games and lotteries would be subject to the tax charged on items that harm health or the environment. The sin tax on the industry was approved by Congress in December and President Luiz Inacio Lula da Silva officially signed the Brazilian tax reform in January. However, the exact rate of the tax on gambling and when it will be applied have yet to be confirmed.
Licensing
In addition, there are some questions over just how smooth the licensing process will be from now on. Operators have understandably been keen to get on board. In January when Brazil finally launched its regulated online market the list of companies authorised for sports betting and online games included 15 definitive licenses, valid until December 31, 2029, and 66 provisional licences, giving companies 30 days to address identified issues. In total, 136 brands were approved. The companies on the initial list are those that submitted their applications by August 20, 2024. Applications made after this date are under review and, according to current regulations, must be processed within 150 days from the initial documentation submission.
A number of operators have appealed the SPA’s rulings. So far, the SPA has been compelled to authorise the operation of seven companies and 19 brands due to federal court decisions. The way gambling has been regulated in Brazil has led to varying interpretations, including concerns regarding the appropriateness of the companies involved and the absence of transparent criteria for denying authorisations. More cases are likely to follow as operators question the decisions handed down by the newly established gambling board.
Corruption
In addition, worrying reports have begun to emerge regarding the licensing process. In December Senator Izalci Lucas drew attention to information published in Brazilian newspaper O Estado de S. Paulo that claimed that beneficiaries of social welfare programmes such as Bolsa Família had appeared as owners of online gambling companies. According to the article, foreign groups had used Brazilians as “front men” to open ghost companies.
“The Ministry of Finance, which should be the guardian of the authorisation process for these companies, seems more concerned with counting the R$30m collected for each subsidy than with ensuring the suitability of the applicants. The delay in the analysis of applications creates a perfect window of opportunity for fraudsters to operate with impunity,” he said.
The Senator said that it will be necessary to move towards some kind of reform or regulatory modification that leads to tightening controls. “It is time to demand a structural reform that prioritizes ethics, transparency and social justice, before the collapse is irreversible,” he said.
According to Estadão, of 183 applications for registration of online gambling platforms submitted to the Betting Management System of the Ministry of Finance 33 were registered by people who provided their data in exchange for payments or whose names were used irregularly. Those who admitted to having sold the name to foreigners said they received R$ 600 for a company registered with the Ministry of Finance.
Another 20 companies also have signs of irregularities because they appear as registered with the Federal Treasury or are in the name of beneficiaries of social programs according to the same report. Of those registered in the name of “front men”, the report identified Chinese operators who recruited Brazilians to open companies and apply for regulation by the Ministry of Finance. Some of the operators are based abroad, including in Asian and Eastern European countries, while others reside in Brazil.
Among those responsible for the scheme, the investigation found two foreigners who hired Brazilians to open at least 30 companies in the country.
More reports of possible corruption emerged in December when Brazilian press reported that the Federal Police had initiated an investigation into allegations that, a prominent lobbyist in Brasília, solicited bribes from businessmen in the online sports betting industry.
The report indicates that the lobbyist was previously arrested by the Federal Police in 2018 for demanding bribes related to union registrations with the Ministry of Labour. In this latest case, the lobbyist is accused of attempting to extort R$50 million from a businessman to evade a summons and possible indictment by the CPI das Bets. The Parliamentary Inquiry Commission (CPI das Bets) was established in the Senate in November to examine the impact of betting on family finances and potential money laundering activities.
Outlook
While the spectre of corruption looms large as it does in most Latin American jurisdictions there is strong evidence to suggest that improved interdepartmental efforts are creating a far more stable environment for operators and a safer environment for players as well. Case in point in November the Ministry of Sports, through the National Secretariat for Sports Betting and Economic Development of Sports (SNAEDE), reported irregularities on platforms where digital influencers were promoting online betting. SNAEDE’s investigation revealed a network of 53 accounts and 25 channels on YouTube, with over 100,000 viewers per broadcast.
The investigation also revealed that these sites, which are advertised by influencers were taking money from players without paying winnings. Since then, the Minister of Sports André Fufuca has met with Finance Minister Fernando Haddad to discuss the regulation of sports betting and online gaming in Brazil. During the meeting, they discussed the approval and oversight of sports betting and online gaming companies, mechanisms for blocking illegal sites, and ensuring integrity in sports betting.
In addition, lawmakers are taking a very close look at sports betting corruption as part of two parliamentary inquiries. Coordinated efforts between different government departments like this coupled with continued efforts to block unauthorised operators, and a strict licensing regime will lead to a much better outlook.
Although the market still faces a number of serious issues it will continue to provide ample opportunities for operators going forwards. These opportunities will only continue to grow if Brazil takes the next step and allows for a land-based expansion later this year.
