We spoke with Sopho Kordzaia, head of B2B Partnerships at Upgaming, to explore the future of Brazil gambling regulation and how iGaming operators can get ready for this new regulatory landscape.
Brazil’s new gambling regulations are shaping the future of the country’s betting industry, introducing key changes to ensure safer and more transparent operations. The laws cover many areas, from taxation and responsible gambling measures to strict rules on how operators must handle payments. While the regulations aim to bring in more revenue and protect players from fraud, they also present challenges that will influence the process. So, here’s a question: How will these new rules impact the market? Let’s find out.
In December 2023, the Brazilian Senate finally passed sports betting regulations. What was happening before then, and why did this change take so long to arrive?
Well, the situation was quite complex. All forms of gambling were completely banned in Brazil in the 1940s, despite the fact that gambling was quite popular and widely proliferated in the region. The prohibition had seen quite a resistance among Brazilian people, and eventually, gambling moved to the underground. The black market of bookmakers appeared all over the country.
Over time, continued pressure from the local population and the ineffectiveness of the banning policy itself partially paid off, and several restrictions were lifted. As a result, bingo, horse racing, and lottery were allowed, but it took decades.
In 2018, there was an attempt to legalize fixed-odds sports betting, but it failed for unknown reasons. The main thing with this whole uncertainty was that gambling restrictions in Brazil were only applied to local operators. And this created a window of opportunity for foreign operators – they could receive loads of traffic from Brazil. Local players were also interested, and once the operators started to target the Brazilian market, they met this “news” enthusiastically, and the market exploded (Check out the article – Brazil’s Betting Boom – A Closer Look at Average Bet Growth).
This showed the government that the huge profits flowing out of the country could be taxed, the operations could be monitored and set in a legal framework, and so on. In other words, a part of the gross revenue generated from gambling activities can stay in the country. Personally, I think that the Brazilian market needed a slight stimulus that would have set things straight. It’s just that this final kick took kind of too long to arrive, and that’s why Brazil gambling regulation was halted.
What were the reasons that prompted the introduction of the new law?
There are various reasons, but probably the most basic ones that can explain the introduction of Brazil gambling regulation are:
- Promotion of safe and responsible gambling and suppression of frauds and money-laundering
- Increase the budget of the country
So, Brazil online gambling regulations aim to create a safer environment for players by protecting their personal data from third parties and promoting responsible gambling practices.
Personal information (necessary for meeting the KYC requirements) will only be known to the legal operators and the governing body itself, which supervises how those operators use the data. So, in case of any violations, there will be penalties and bans.
Operators are also required to implement responsible gambling measures, such as self-exclusion options or spending limits, to promote responsible gambling practices.
But it doesn’t end here. Brazil gambling regulation implies that players will be subjected to paying a 15% tax on their winnings to the government if their net annual gambling winnings are equal to or above the Minimum Taxable Threshold of R$27 110.40 ( ≈ $4 923) in a year. This restriction targets problematic gambling and sets a buffer for casual and low-stakes players to promote responsible gambling legitimately.
Finally, one of the main drivers for the law is economic. The government has seen how much revenue has been slipping away to foreign operators. By legalizing and taxing gambling activities, the country can ensure a portion of the profits stays within its borders. This additional revenue can be used for public services like healthcare, education, and infrastructure, providing a financial boost to the national budget.
What changed for the operators in Brazil? and How can they comply with new regulations?
Obviously one of the most important changes will be on the surface – Operators will function on the legalized market, protected by the law. This creates a number of challenges regarding requirements – Will relatively small operators be able to satisfy all the requirements? What about the local operators? Will there be any change from this stance?
So, let’s look at the requirements for operators that need to comply with Brazil gambling regulation. According to new regulations:
- Operators need to be based in Brazil, they must have offices in the country, otherwise, they are banned from offering online gambling activities to Brazilian users.
- They have to pay a license fee, which is 30 Million Reals (6 million USD). License will be valid for 5 years.
- It’s a must to have a customer support team and a consent from players to share their personal information which will be used only according to the law.
- Operators have to pay 12% from their GGR; 15% Corporate Income Tax, and additional 10% on profits above 240 000 Brazilian Real ( ≈ 43 600 USD) on a yearly basis.
- Safe gambling measures must be considered, meaning that operators must provide self-exclusion tools and cooling-off periods for the players per their request. They need to satisfy a range of other requirements regarding integrity and responsibility proposed by nonprofit organizations ABRADIE and IBJR.
- There will be some technical requirements and the cap of the minimum value of shared capital, which will be specified in the future.
These are the basic requirements of Brazil gambling regulation operators need to comply with. Due to the pretty high cost of the license, I think local operators with no strong financial background won’t stand a chance to acquire a license, so they’ll probably be left out. Nonetheless, foreign operators and quite famous brands with substantial traffic from Brazil will be able to establish their offices in Brazil, pay the license fee, and comply with other requirements if they want to continue operating legally.
What challenges might the market face after fully passing the regulations?
Yes, the market will definitely face some challenges, especially in the first phase. I think important topics to discuss and deal with will be underground gambling, removing the risk of fraud, and match-fixing.
Let me explain; let’s start with the high license cost, which poses the challenge of entering new gambling companies in a regulated market. I think the real “threat” with this problem is the potential of creating different layers of markets (white and gray/black) within one country. So, on the one hand, there will be licensed operators, who’ll probably be quite strong gambling companies. And on the other side, there will be operators who can not afford to pay the license fee but won’t back down and continue to provide their service to local players. So, there is a possibility that we’ll have an underground black market below the regulated surface. The way I see it, it’s a case worthy of attention from every involved party.
As we know, Brazil gambling regulations also affect payments. Can you shed some light on this topic, too?
Yes, Brazil gambling regulations set clear rules for handling payments to ensure everything stays secure and above board. Operators are only allowed to receive iGaming payments through methods like:
- PIX (instant payment)
- TED (electronic transfer)
- Debit or prepaid cards
- Transfers between accounts at the same bank.
Operators cannot accept:
- Cash, checks, cryptocurrencies (Brazil says no to crypto casinos), or any payments from unregistered accounts or third parties.
- Credit cards and other post-paid methods are also not allowed.
Furthermore, only financial institutions approved by the Central Bank of Brazil can offer accounts for deposits, withdrawals, or prize payouts. All payments and withdrawals must go through electronic transfers, and both the bettor and operator must have accounts at authorized banks or payment institutions. This keeps everything within a controlled and legal framework.
I must say that the rules about payments are very clear from the legal framework. Since everything is centralized, meaning that every transaction must go through the Central Bank of Brazil, there is a minimal chance of executing illegal payments in gambling, which will significantly decrease the prevalence of fraudulent activities.
How do Brazil gambling regulations compare to other market’s regulations?
Considering that the regulated market is still new in Brazil, it’s hard to make a detailed and clear comparison with the other well-established markets that have been around for decades. Nonetheless, we can take into account several factors, such as price and tax environment, and compare Brazil to other jurisdictions that also issue iGaming licenses.
Let’s line up facts about these two factors across Curacao, MGA, and Brazil. The price of the Curacao gaming license is € 70 000 in a year – So, it’s € 350 000 in 5 years (15 times cheaper than in Brazil). Plus, there is 0% corporate income tax and 2% net gains tax. So, the tax policy is quite favorable for operators. They don’t have to pay anything, so to speak.
The price of the MGA license varies; operators pay € 50 000 Euro in the first year and at least € 25 000 in the following years, but it might change depending on various factors. Taking into account the maximum possible values, the price is still lower than it is in Brazil.
The tax regime is quite heavy in Malta. There can be multiple taxes with small percentages, but it still varies from case to case. I would have to say that Brazil also has quite a strict tax environment, although not as burdensome as it is in Malta, meaning that it won’t give you bureaucratic headaches.
What’s an expert opinion about the future of Brazil’s gambling market after the regulation?
Brazil has enormous potential, but because Brazil’s online gambling regulation is still a new process, it will be hard to predict how the market will react in the future. It’ll definitely impact the whole region, affecting online gambling and sports betting in Latin America. So, maybe we can see some changes in the regulatory landscape of other countries as well.
Well, I want to highlight my opinion that any market must be regulated at some level. The existence of adequate regulations is a must and a determining factor in business development.
Therefore, I don’t think regulations are a prerequisite for reassessing positive expectations about the market. On the contrary, a healthy environment will promote healthy competition, diversify the user base, and increase the quality of the offered content and products. So, we should get ready for some new challenges and opportunities to come.
