‘Brazil regulator has opened its arms but is yet to show its teeth’ say stakeholders

Overregulation and high compliance costs could have a negative impact on Brazil’s young betting market, experts have cautioned. 

Brazil launched its regulated gambling market in January after years of careful planning, establishing the Secretariat of Prizes and Betting (SPA) to oversee a sector alongside an expansive list of market entry requirements – one of which being the notoriously high licence fee of BR $30m (US $5.24m).

On a recent webinar, Mike De Graaff, Chief Compliance Officer of Betcomply, warned that if they become financially exhausted by compliance obligations, participants in the licenced Brazilian market will look to recoup their losses as soon as possible through their market penetration strategies – leading to dangerous precedents.

“That then in turn results in non-compliant environments because they’re trying to cut down costs on compliance to recoup the losses of getting into the market.

“This immediately opens up the circle that I advocate against, which is to try and penetrate the market non-compliantly, and then complain that the government or the public opinion is against you and in favour of more restrictions.”

Scott Burrows, Head of Technical Compliance at Superbet, added that the general practice with already established regulated markets is to measure an operator’s risk appetite to the reach of the regulator’s sanctions.

However, Brazil poses a challenge in the sense that SPA is still getting to grips with the market and has not utilised its full range of regulatory powers just yet. 

“They are yet to fully show their teeth,” Burrows commented.

New market presents new challenges

Ensuring that a commercial sector remains efficiently regulated while at the same time attractive for investors requires strong ties between all parties involved. 

For the gambling industry in Brazil, such a comprehensive cooperation on all levels is still in the early stages, but the strong foundations are there, De Graaf and Burrows continued. 

On the topic of the challenges and the intricacies of the Brazilian market that operators face, Burrows highlighted Face ID compliance requirements as something that companies should be aware of.

“It’s certainly a first for me at this level – requiring independent face recognition checks at various points of the life cycle,” he told Isadora Marcante, Relationship Manager for Brazil at SBC. 

“That was a challenge technically, but we also have to look at the player experience. Players in Brazil sometimes use older devices, they’re not using brand new flagship Samsungs or iPhones. 

“The camera quality does play a little bit into how we can implement this. We need to take into account the lower-end devices and what that does to the quality of the facial recognition.” 

Another potential obstacle that operators may face further down the line is the Brazilian court system, which at times could be “draconian”, Brazilian gaming lawyer Neil Montgomery said.

“The entrants to the market, most of them being foreign companies, are now facing the challenges of dealing with this complex legislation,” Montgomery added.

“Not only the very strict and burdensome regulatory requirements from the federal regulator, but also other legislation that exists – for example Brazilian labour and employment laws that are quite strict, and also a new reality, which is the very treacherous environment of customer claims. 

“I envisage operators facing hundreds if not thousands of claims depending on the size of the operator and the client portfolio.”

To learn more about the setbacks that operators should be ready for, watch the full webinar here.