The 4H view: Everything you need to know about Brazil

EGR has partnered with 4H Agency to bring its readers a series of long-form articles on the requirements and key facts and figures for a host of emerging markets throughout the world.

Tapping into 4H’s talent pool of experts, the articles will outline the regulatory framework and entry requirements for interested parties, as well as an insider’s view on how the market could shape up in the coming years.

Here, the series continues with Brazil, with commentary from 4H partner and head of consulting department, Ivan Kurochkin.

Market overview

Brazil, the largest and most populous country in Latin America, is undergoing transformative changes in its gambling industry. With a population exceeding 212 million and a GDP of over $2tn, Brazil holds immense potential for operators aiming to tap into one of the region’s most profitable markets.

Historically, gambling in Brazil has been heavily restricted under the “Misdemeanours Law” of 1941, which outlawed most forms of gambling, save for horserace betting and state lotteries. The law’s intent was to preserve social morality, leaving the market largely dormant for over 75 years.

Recent legislative efforts, including the enactment of Law No. 13,756/2018 and Law No. 14,790/2023, have set the stage for a regulated gambling landscape. Sports betting has been legalised, and the regulated market went live on 1 January.

The law introduces clear guidelines for payment methods, customer support, advertising and measures to prevent money laundering and fraud. These developments signal a significant shift, balancing market potential with the need for robust regulation and social protections.

Regulations

The regulatory framework for gambling in Brazil is quite wide, and different verticals of gambling are regulated by separate legislations. Also, the regulation is divided by federal and state legislation.

The Secretariat of Prizes and Betting (SPA) is responsible for licensing, permitting, granting, regulating, monitoring, supervising, overseeing and sanctioning sports betting, lotteries, and other related activities. The Ministry of Agriculture, Livestock and Food Supply is responsible for the regulation of horserace betting.

Federal lotteries offered to the public are currently state-owned. The federal legislation also prohibits land-based casinos and slot machines.

Licence types

• Online gambling (Starting 2025, Brazil federal licensing regime will go live, covering both sports betting and online games (casino) operations, and is valid across the entire national territory);
• Sports betting (Starting 2025, Brazil federal licensing regime will go live, covering both sports betting and online games (casino) operations, and is valid across the entire national territory);
• Horserace betting;
• Lottery (At the federal level, a monopoly has been granted to Caixa. In 2020, the Federal Supreme Court allowed states to offer lottery games, including online ones, authorised by the federal government. Several states are now updating their regulatory frameworks).

Land-based casinos and gaming machines are still prohibited.

Licence requirements

Sports betting and online casino licences can be obtained from the SPA by legal entities established under Brazilian laws and meeting following requirements:

• Only Brazilian legal entities with headquarters and management within the national territory.
• Organised as limited liability companies or corporations with a minimum capital of BRL30m.
• Foreign subsidiaries can apply if a Brazilian partner holds at least 20% of the share capital.
• Demonstrate integrity and prior experience in gaming services.
• Technical, legal, financial, tax and labour aspects.
• Good standing of shareholders, ultimate beneficial owners and administrators.

To establish horserace betting, the applicant must:

• be a non-profit entity legally incorporated in Brazil;
• own or have the rights to use a racetrack;
• demonstrate the technical and economic viability of the weekly racing schedule;
• present the floor plan of the race field; and
• present the draft of a general betting plan (which includes the rules applicable for each game to be run by the operator, such as prizes, ticket value, minimum and maximum betting amounts and payout).

As was stated prior, lotteries in Brazil are covered by the monopoly and therefore are not accessible to the public.

Licence cost and taxation

Licences for sports betting/online gambling will be granted for a period of five years, upon payment of BRL30m.

Horserace betting licences do not have an expiry date.

Gambling tax is as follows:

Gambling activities in Brazil are subject to corporate income tax (IRPJ) and social contribution on net profit (CSLL) at a combined rate of 34%:

• CSLL rate is 9%
• IRPJ rate is 15%
• 10% surcharge on taxable income exceeding BRL240,000 per year

The effective tax rate varies based on the system used by the Brazilian legal entity to calculate IRPJ and CSLL, which can be either the real profit regime or the deemed profit regime. Companies with overall revenues above BRL78m in the previous year are subject to the real profit regime by default.

In the real profit regime, taxation depends on the net profit accounting type, adjustable for non-deductible expenses and specified exclusions. The Program of Social Integration (PIS) and the Contribution for the Financing of Social Security (COFINS) are subject to non-cumulative taxation at rates of 1.65% and 7.6%, respectively, allowing the use of credits from acquisitions.

As for the deemed profit regime, the tax base for services is 32% of the company’s gross revenues. PIS and COFINS are subject to cumulative taxation at rates of 0.65% and 3%, respectively, without the option to use credits.

In addition to ordinary corporate taxes, gambling activities are also subject to the following taxes:

Sports betting and online casinos

• Operator revenue: 12% of GGR.
• Personal Income Tax (IRPF) on net winnings: 15% on amounts exceeding BRL 2,259.20 annually.

Horserace betting has its own specific system of taxation:

• Race betting organisers must pay a monthly contribution based on the bets taken in the previous month.
  • This contribution is calculated considering the monthly total betting revenue of the operator, excluding:
  • The value paid on prizes.
  • The amount paid to turf professionals and horse owners.
• The contribution rates are established on a progressive accumulative scale and vary depending on the “maior valor de referencia” (MVR) — a Brazilian government metric used to establish fines or taxes in line with inflation.
• The contribution rate scale is as follows:
  • Bets taken between 1 and 2,500 MVR — Exempt.
  • Bets taken between 2,501 and 3,500 MVR — 0.5 percent rate.
  • Bets taken between 3,501 and 4,000 MVR — 1 percent rate.
  • Bets taken of 4,001 MVR or more — 1.5 percent rate.
• Income tax withholding: 15% on prizes to horsemen, breeders and jockeys; 30% on bettors’ prizes.

Responsible gambling and AML

Normative Ordinance No 1,330/2023 and Ordinance SPA/MF No 1,231/2024 states that responsible gambling consists of measures, guidelines and practices to be adopted for:

• the prevention of compulsive or pathological gambling disorders;
• the prevention and non-inducement of debt; and
• the protection of vulnerable individuals, especially minors and the elderly.

Additionally, gambling operators must have internal control mechanisms and systems that allow the bettor to establish:

• a daily limit for gambling or betting;
• a maximum loss limit;
• a pause period; and
• self-exclusion.

Furthermore, the Financial Activities Control Council (COAF) serves as the primary regulatory body overseeing AML compliance across industries, including gambling. COAF’s role includes investigating suspicious activities and enforcing penalties for violations.

Operators are required to report any suspected money laundering or related activities. They must also implement robust internal policies to identify, assess and control risks associated with financial crimes. These policies include measures such as enhanced customer due diligence, transaction monitoring and mandatory reporting of high-risk activities.

The government’s emphasis on AML extends to enforcing vigilance against potential risks in both online and land-based operations. By fostering collaboration between regulatory authorities and operators, Brazil aims to build a secure and transparent gambling market that protects against criminal exploitation.

Marketing and advertising restrictions

Normative Ordinance No 1,330/2023 and Ordinance SPA/MF No 1,231/2024 provides that advertising, public relations and marketing actions may not:

• be aired in schools, universities and other places where minors are located;
• lack an age restriction notice, embodied by the “18+” symbol or the notice “prohibited for individuals under 18 years of age”;
• disseminate misleading claims about the odds of winning or the potential gains that bettors can expect;
• portray betting as socially appealing or contain statements from celebrities or digital influencers that suggest gambling contributes to personal or social success or improved financial conditions;
• use sexually suggestive messages or objectify physical attributes;
• incite intensification or exaggeration in the practice of betting;
• promote the product as a means to recover losses from previous bets or other financial losses;
• in any way offend cultural beliefs or traditions of the country, especially those against gambling; and
• suggest or induce the belief that, among other situations, skill, dexterity or experience can influence the outcome of a sports event.

Market specifics for entry

Operators joining the market should consider the state division of the country. In Brazilian states where accreditation processes for sports betting operators are active, there are notable variations in the requirements.

For instance, in Rio de Janeiro, online bets are considered to occur within the state’s territory for all legal purposes, regardless of the users’ physical location. This interpretation faces legal challenges, as federal legislation mandates that operators licensed by state lotteries must operate exclusively within the state’s geographical limits, leading to disputes over the territorial extent of the operating authorisation.

In Paraná, the regulations are even more restrictive. Operators licensed in the state cannot accept bets from outside its borders, ensuring that betting activities remain strictly within the geographical reach for which the licence was issued, in line with the principles of territoriality governing gaming and betting licences.

Additionally, recent changes to the regulatory framework have introduced several key shifts that shape market entry dynamics. As mentioned above, operators are now required to partner with Brazilian entities, with local partners holding at least 20% of the company’s capital, emphasising national economic involvement.

Recently intoduced restrictions on B2B partnerships mean that technology providers cannot collaborate with unlicensed B2C companies, ensuring stricter compliance across the industry. The inclusion of online slots, roulette and card games like blackjack and poker within the licensed market is a significant step forward, attracting major players such as Stake and Flutter.

The 4H view

Recent developments show Brazil’s intent to create a competitive and transparent market while ensuring robust oversight during the transition to legal market phase.

As part of this transition, only operators that were active and had applied for a licence were allowed to continue operations from 1 October to 31 December, ahead of the official market launch on 1 January 2025. This month Brazil’s gambling regulator has issued 67 federal online betting licences.

Simultaneously, a significant crackdown on illegal online gambling led to the planned shutdown of approximately 2,000 unauthorised websites by October 2024. Users of unauthorised platforms were given a deadline of 10 October to withdraw their funds, signaling a decisive move toward establishing a fully regulated market.

However, the government, along with some banks and think tanks, has expressed concerns about the negative impact of gambling on consumer spending. Studies suggest that gambling is diverting funds from other areas of the economy, echoing similar trends in the US.

Despite projected increases in tax revenues from betting licences, research shows that low-income groups are spending more on gambling, leading to financial instability. The gambling industry disputes these findings, attributing drops in consumption to the pandemic.

Nevertheless, as Brazil moves forward with a regulated sector, investor interest remains strong, and the market continues to attract major players, both domestic and international.

Currently, Brazil’s gambling market presents a mix of opportunities and challenges for operators looking to enter this rapidly evolving sector. The country’s high internet penetration and cultural passion for sports, especially football, provide a strong foundation for online gambling.

Ivan Kurochkin is one of the founders of 4H Agency, partner and head of the Eastern Europe desk at 4H.

After 10+ years’ experience in consulting every type of clients from the testing laboratories to global operators and B2B providers on a variety of matters related to the gambling operations, Ivan has proven himself to be a business-oriented multi-jurisdictional advisor for entering new markets across the globe.

Ivan’s background helps him to choose the best and most efficient scenarios for expansion to new market or for bringing existing operations of 4H’s clients to a significantly new level. Ivan is also an expert in the field of responsible gambling and frequent author for industry media.