Industry reaction to igaming being removed from Brazil's regulatory framework

The reality of regulated sports betting in Brazil moved one step closer this week after the Senate approved Bill PL 3,626/2023.

The document will now be sent back to the lower house, the Chamber of Deputies, to be studied once again before ascension to President Luiz Inácio Lula da Silva for his final approval.

However, despite inching closer to a regulated sports betting market, igaming was struck from the bill in a major blow to operators and the state’s coffers.

With online games of chance facing challengers from Senators, who successfully postponed the original date of the vote on the bill due to their concerns, the vertical may well fall outside the scope of the regulated market.

There are hopes the Chamber of Deputies will attempt to add igaming regulation back into the bill, and concerns over a significant drop in tax income as well as black-market leakage, could force politicians’ hands.

Despite the lack of igaming included in the bill, a lower GGR tax rate of 12% will have pleased operators, although a 15% players’ winnings tax and a requirement for companies to be based in Brazil may well bite.

Here, EGR spoke with some key players in the Brazilian market to gauge their reaction to the news.

The National Association of Gaming and Lotteries (ANJL)

“By excluding online games from the regulation of sports betting, the possibility of significant tax collection is outside the law. In addition, the lack of regulations allows the continuity of the operation of illegal websites operating outside the rules established by the Ministry of Finance.

“It undermines oversight and maintains insecurity for bettors, leaving them at the mercy of irresponsible and abusive gambling practices. The ANJL hopes that the Chamber of Deputies will correct this omission by the Senate by also bringing online games to the field of legality and good regulation.

“To be against the regulation of gambling, a widespread practice in Brazilian society, is to be in favour of the continuity of illegal and irresponsible gambling in the country, to the detriment of the most vulnerable part of the equation, the Brazilian citizen.”

Neil Montgomery, founder and managing partner of Montgomery & Associados

“I can say that I am certainly not the only one disappointed with the Senate’s exclusion of igaming from Bill PL 3,626/23.

“While I had anticipated last week that there was going to be fierce opposition by certain members of the Senate to block the inclusion of igaming, the federal government and the industry were counting on the inclusion being maintained to ensure the revenue levels generated by both verticals (fixed-odds sports betting and igaming), it being widely publicised that igaming generates a much more substantial revenue flow to all stakeholders than sports betting does.

“I hope that the less conservative House of Representatives, which had the initiative and courage to include igaming in the text approved there earlier this year, will correct this flop and send the final text for sanctioning by President Lula with both verticals.

“I also have my fingers crossed that the lower house will also delete the 20% Brazilian ownership requirement and that if it does not, that President Lula veto the provision establishing such requirement, which is a major market entry barrier.”

Rafael Marchetti Marcondes, chief legal officer at Rei do Pitaco

“The approval of Bill PL 3,626/23 by the Federal Senate has many advances, most of them concerning taxation. The Senate was able to reduce taxes over operators and prizes, proposing more affordable rates, which allows Brazil to be a positive global standard for sports betting.

“However, not allowing igaming in Brazil puts channelling rate at risk. Almost all the offshore operators in Brazil offer not only sports betting but also igaming. And, more than that, on an average, igaming represents around 70% of their incomes.

“So, by not approving igaming, many operators may opt for not joining the regulated market, which puts the efficiency of the local licence at risk and also can frustrate the government expectations with tax collection.

“The Chamber of Deputies still has the opportunity of reinserting igaming into the bill and legalising the activity in Brazil. Not only the market but also the government hope that the lower house has a broader understanding of the impacts of not regulating igaming.”

Staffan Cnattingius, former EveryMatrix director of business development for Latam

“The challenge now will be for the deputies to vote on the amendments before Christmas recess which runs from 22 December and continues until early February 2024. So we effectively have a further eight days for the vote to take place.

“While the Senate voted to remove igaming from the bill, the deputies retain the authority to overturn the exclusion, This means that we will potentially see igaming re-introduced in the bill.

“The subject of igaming will likely be a very contentious point in next week in Chamber of Deputies. Given that the Chamber of Deputies retains the authority to reintroduce igaming into the bill, this is not over yet.”