SBC News Voice of the Sports Betting Industry
In Brazilian business circles, the name of a fruit tree commonly believed to grow only in Brazil is sometimes used to refer to unique policies or regulatory requirements that can make the country a confusing one to operate in, particularly for outsiders.
Based on the evidence of the past 12 months, the term jabuticaba certainly appears apt for Brazil’s forthcoming regulated market for online gambling, which is set to be officially launched on January 1, 2025.
It’s easy to see why the Brazilian market is being so eagerly anticipated.
Vixio forecasts that total gross revenue from online sports betting and casino games will amount to more than US$2.9bn in its first year, immediately establishing Brazil as a top 10 regulated market globally.
Revenue should then reach $6.3bn by 2028, according to the latest Vixio forecasts, which is likely enough to make Brazil the number two market in the world unless New York legalises and launches igaming before then.
Still, a smooth rollout of online gambling is far from a sure bet and the Brazilian market offers no shortage of policy risks and unique compliance challenges that operators, suppliers and various other industry stakeholders will need to stay on top of over the coming months.
Risk Of A Regulatory Reset
Many regulated markets in Europe and beyond have followed a similar pattern over the past decade – a period of liberalisation followed a few years or months later by tighter regulatory restrictions on advertising and responsible gambling and sometimes increased taxes, as lawmakers and regulators respond to public and media concerns of over-exposure of gambling.
In Brazil, however, the risks of a legislative backlash and regulatory reset have already accelerated over the course of 2024 – even before the launch of a licensed market.
With a transition period still running, at least some Brazilian policymakers have started to get cold feet in response to a series of recent reports published by Brazil’s Central Bank, other financial institutions and retail groups that all included eye-catching – albeit disputable – figures regarding the amounts supposedly being spent by Brazilians on as-yet unregulated sites.
In September, Brazil’s new betting regulator – the SPA – abruptly changed the terms of the transition process and effectively outlawed any operators yet to apply for a licence.
President Lula later assembled various government ministries and instructed them to review whether the series of regulations that were adopted between April and August but not effective until January 2025 were suitably strict, before later pledging to prohibit online betting in the event that Brazil’s regulatory regime proves unsuccessful.
Goalposts have also been moved regarding the timing of certain restrictions, including on bonuses and payments, with government agencies and judicial figures outside of the SPA showing a willingness to flex their own authority in specific areas.
Online betting has also recaptured the attention of Brazil’s Senate, which in 2023 was the more reluctant of the two houses of Congress to support the full opening of a Brazilian market for both sports betting and casino games.
In November, senators established a formal parliamentary investigation commission (CPI) to probe Brazil’s online gambling sector, with a series of public hearings due to be conducted both in the run-up to and aftermath of the launch of the regulated market.
The Senate CPI is due to report on its findings after 130 days (although this could be extended) and its stated plans include proposing new measures on advertising, responsible gambling and the use of AI by betting platforms.
If that wasn’t enough, senators already have a separate CPI in place to investigate allegations of match-fixing in Brazilian football with potential restrictions on specific bet types, which is one possible area of consideration. Brazil’s Senate is also evaluating a major tax-reform package already approved by the lower house of Congress, which includes a provision to subject fixed-odds betting to an additional, selective tax to be applied to products deemed harmful to Brazilians’ health.
Court Challenges
If Brazil-watchers will have one eye on potential regulatory changes and the Senate, then the other will be cast on the courts and specifically Brazil’s Federal Supreme Court or STF.
The STF is due to consider three separate but overlapping legal challenges against the federal laws underpinning the new licensing regime, filed independently by a leading retail business association, a political party and by just about the most powerful possible plaintiff: the office of Brazil’s Attorney General or Prosecutor-General of the Republic.
All three legal challenges claim that December 2023’s landmark law on online betting violates constitutional guarantees of public health, economic order and free competition.
Supporters of the industry avoided a worst-case scenario in November when the presiding justice for all three cases declined to immediately enjoin the law and thereby freeze implementation of the licensing regime. Still, the judge did immediately order new restrictions to prevent gambling with welfare funds and all three pending challenges will be heard and ruled upon in full at some point in 2025.
Other important legal cases related to online gambling are pending before the STF, too.
Perhaps the most notable is the federal government’s demand for the state lottery of Rio de Janeiro to cease authorising its locally licensed operators to accept bets from players located beyond its own borders in other Brazilian states or even internationally.
The case is by no means a clear-cut one and in the event that Rio prevails, that risks undercutting Brazil’s federal regime by providing an alternative route-to-market for operators to service the whole of the country via a state licence that is subject to a lower upfront fee, lower taxes, and potentially lower suitability standards as well.
Compliance Complexities
The above are all external risk factors that companies will have to be prepared for as Brazil’s newly regulated market goes live.
In addition, the regulatory regime presents plenty of compliance challenges – jabuticaba! – in and of itself, with unique rules in place on facial recognition, payment of winnings and paytable displays, to name but a few.
The unknown number of operators who make it to the starting line for January 1 will all have invested heavily in meeting compliance and reporting requirements – not to mention paying an upfront licensing fee of BR$30m or US$5m+ – before they even sink one centavo into marketing and new customer acquisition in the new regulated market.
As such, they will be especially eager to learn exactly how Brazilian authorities will enforce accompanying legal prohibitions against unlicensed competitors.
The SPA and Brazil’s telecoms regulator Anatel have already had a dry run at web-blocking, blacklisting more than 5,000 sites since the start of October. But Anatel’s president has compared the task of blocking offshore gambling sites to “wiping up ice” and many observers believe that the most effective enforcement strategy will be to cut off unregulated operators from the ubiquitous Pix instant-payments system controlled by the Central Bank of Brazil.
All these legal and policy unknowns mean the jurisdiction perhaps most in the spotlight for the online gambling industry in 2024 will remain so through 2025.
They also bring to mind another phrase sometimes used by Brazilians to describe their doing business in their unique and fascinating country: Brazil is not for beginners.
Vixio analysts have been closely following the emerging market in Brazil and have compiled the Brazil: Online Gambling Playbook 2025, which contains everything you need to know about the state of online gambling and sports betting regulations in Brazil ahead of market launch on January 1st, 2025.
