SBC News Voice of the Sports Betting Industry
Brazilian leaders deem that the protection of the new Bets regime against the black market is a tough challenge of regulatory development applied with minimal frictions.
Irrespective of its federal launch on 1 January 2025, the regime continues to be disrupted by regulatory judgements. Its licensed operators, whether foreign or domestic, are tasked with competing within a nascent market ruptured by transition from grey-to-white, with many protections remaining outstanding.
The sheer size and scale of Brazil will require operators to commit to a multi-million investment on technology, localised operations, advertising, IT and compliance. Yet for incumbents doubts linger on whether the Bets Regime can combat the the persistent threat of illicit gambling, as seen at the SBC Summit Rio conference and trade show last week.
Early days… tough adjustments
“I think the main challenge in our industry is going to be fighting the illegal market,” said Alex Fonseca, CEO of Romania-headquartered multinational Superbet, which has emerged as one Brazil’s biggest betting firms post-regulation.
“We have seen an unregulated market that is still growing, having somehow easy access to media channels and payment methods,” he continued.
“This deteriorates our capacity to create a regulated and stronger industry. This is probably the biggest challenge, not just today but for the future. All regulated companies are faced with this challenge to a larger or lesser level.”
The general consensus at SBC Summit Rio was, rather unsurprisingly, that the launch of Brazil’s betting market was a necessary step and a positive thing for both the industry and the country’s economy as a whole.
Brazil’s betting market existed as a grey one for some time – complete with the lack of cohesive player protection, anti-money laundering and fraud prevention and efficient taxation typical of grey markets.
The ‘Bets’ regime, the regulatory framework governing the new regulated market which launched on 1 January, sought to address this, while the government also sees reais signs in the industry and its potential contributions to the Brazilian economy.
Public Awareness makes a difference
This does not mean that the illegal market has gone away, however, and it’s a harsh truth that it probably never will. Almir Ribeiro, CEO Brasil at US-based betting firm BetMGM, noted that even the most mature regulated markets still have an illegal side.
“Regulators will have to evolve to close the gaps, including financial gaps,” he said, sharing his views on how he thinks the industry and the regulators governing it, chiefly the Secretariat of Prizes and Betting (SPA), should combat illegality.
He added: “This market will always exist, but regulatory authorities need to evolve and proceed with what the customers want. At the end of the day it is their decision about where they are going.”
The Bets regime is young, barely three months old, in comparison to much older markets like the UK market, which is over 60 years old. In these early days, regulated firms are confident that betting is not being imposed on Brazilians, with BetMGM’s Ribeiro claiming ‘ it has been embraced by Brazilians’.
Public image means a lot though, and operators are concerned that consumers may conflate the regulated with the unregulated in these early days of the market. This could tarnish the regular industry’s image and hinder the market before it has even fully taken off.
Working with regulators like the SPA to clamp down on illicit firms is a priority. However, stakeholders are also keen to engage with regulators on another matter, ensuring that regulation does not overreach and in turn hinder market development.
“We need to fight illegal houses, something that really has an impact on our market. Once they are working illegally they hinder the way Brazilian people see our market,” said Rafael Borges, CEO, UX Group and Reals, one of the first licence holders in the new space.
“In addition to fighting illegal companies, we have another task we have to be close to the government with. We have to be organised so that regulation is not restricted, because if it’s over restricted there is too much friction for users registering and depositing, the chance of pushing these people out to the illegal market is huge.”
Taking heed from Europe
Brazil market players are wisely looking to other markets for examples of best practice and lessons to be learned – the US, the UK, France and the Nordics, Spain and Italy are all good examples, while others can be found closer to home in Colombia or Argentina.
This is common sense. However, stakeholders have also noted some worrying regulatory trends in these markets, namely clampdowns on marketing seen in Spain, Italy, the Netherlands, Belgium and the UK, to one extent or another.
It is important to note that these clampdowns are a response to public concerns around a saturation of betting marketing in sports and the societal impact of problem gambling, and the potential correlation between the two.
In Brazil, as in the markets discussed above, betting stakeholders have countered by arguing that marketing serves to channel customers away from unsafe firms and to regulated ones which offer high standards of player protection.
“The impact could be lethal,” Superbet’s Fonseca said, commenting on the potential for clampdowns on advertising – and how Brazilian operators can avoid this happening by marketing responsibly.
“We saw in Spain, the ban on all marketing initiatives because operators were marketing very aggressively. We need to consider our message to customers.”
The ‘completely out of control’ days of Brazil’s grey market where influencers promoted gambling ‘as an investment’ are over, Fonseca said, to the agreement of other stakeholders at the Summit last week.
If Brazil’s regulated betting operators wish to continue sustainability, they have a lot to consider. The culture around betting must be cultivated as one of entertainment, not investment or making money, Superbet’s CEO says.
This is an important message for the industry to take on board. Learning from other markets will be key, and lessons must be implemented as soon as possible around responsible marketing, player protection and communication if the tug of war against illegal firms is to be pulled in the regulated industry’s favour – and the sooner it is done so, the better.
