QUI 20 DE FEVEREIRO DE 2020 - 12:16hs.
Unlimited authorization scheme for nine years

Brazil presents first regulations to sportsbook operators

The Ministry of Economy already has its first draft of the sports betting sector decree for Brazil. As Games Magazine Brasil anticipated three3 months ago, the scheme will be authorization and not concession to the companies. They must pay a one-time fee of R$ 3 million (US$ 733,000) and the license will be valid for nine years. Then, the bookmaker will have to pay from R$ 20,000 (US$ 4,890) to R$ 45,000 (US$ 11,000) per month. The chosen tax regime is 1% of revenues (5% to 7% of GGR).

To calm down the anxiety of the local and international market, comply with the established deadlines and start moving the business, Alexandre Manoel Angelo da Silva, National Secretary of the Public Policy, Planning, Energy and Lottery of the Ministry of Economy, informed the principles guidelines of the first minute of the decree that will allow operators to work in Brazil with the sports betting business.

In the framework of the Brazil Football Expo event organized by CBF, Alexandre assured that in mid-September this proposal for the market will be officially presented, carried out with the Ministry's own knowledge and studios, together with the results of the recent consultation published by SECAP. This request had an unexpected high participation, with a total of 1849 suggestions from all the involved sectors.

The draft sets out the rules that will be followed for the exploration of the business, with rules to be followed by the companies, taxation regime and penalties for violators. The document seeks to follow best practices and not to repeat mistakes of other markets:

  • Authorization Scheme
    The answer in the public consultation on this topic was blunt in favor of the chosen option. That is, there will be no limits on the number of betting houses that wish to operate in Brazil or bids. Games Magazine has anticipated this option in an article of last June. The Ministry seeks to give more flexibility to all companies operating in the market and to comply with the requirements of the decree.
  • One-time authorization fee
    In order to operate in the country, these firms will have to pay an authorization fee of R$ 3 million (US$ 733,000) in a single installment. This license is valid for nine years. After this time, the operators had to renew this authorization with a readjusted new payment. This timeframe is a mix between the US and the Italian model.
  • Monthly payments
    On a monthly basis, the bookmaker will also have to pay an established amount, according to the operating regime chosen. For those who work exclusively in the physical environment, the rate is R$ 20,000 (US$ 4,890). Firms operating only online will have to pay R$ 30,000 (US$ 7,335) per month. Those who explore both modes will pay R$ 45,000 (US$ 11,000) per month.
  • Mandatory financial reserves of US$ 1.45 million
    Companies will also must have their own financial reserve of at least R$ 6 million (US$ 1.45m). This amount will serve as a guarantee for the payment of players prizes.
  • Tax scheme chosen is 1% over invoicing
    To end the illegality and offer a legally secure market, the tax regime chosen is 1% of revenues. The market demanded that the tax regime should be calculated on the Gross Gaming Revenue (GGR), which is gross revenue minus premiums paid. Taxing 1% (of revenues) is equivalent to 5% to 7% on GGR and contemplates the desire of private enterprise, according to the Ministry of Economy. This model is the same regime as Italy or England, already developed markets.
  • Jail and fine
    For those who do not follow Brazilian law, the idea of the Ministry's specialists is to make a change in the Penal Code, increasing the punishment for those who work outside the law. This will require approval of the change by the National Congress. Under the project, those responsible for companies operating any form of unauthorized lottery will be subject to imprisonment of one to five years and a fine. On the other hand, those who participate in manipulation of results will be punished with detention of two to eight years, in addition to a fine.
  • Supervisory regulatory framework
    - It will be necessary to implement the shift schedule of three uninterrupted shifts (8 hours each) with the appropriate increase of staff from 18 to 24.

    - It will also make use of the new system of personnel movement of the Federal Public Administration, so as not to imply cost increases (Ordinance MP No. 193, 2018).

    Operating agents shall make available to the regulatory administrative and management structure information:

    - Collected, owned, obtained or produced by an association, entity, body or organization operating internationally that consolidates inputs for the analysis, prohibition, detection, inhibition or prevention of irregularities in the operation of lotteries and prize-winning betting schemes or suspicious activities that may compromise the integrity of a sporting event; and

    -Referring to the certification of physical equipment (hardware) and computer programs (software) used by the operator and the validation of each bet raised.

SECAP Considerations

Expectation of increase in the collection of lotteries in the order of R$ 20 billion (US$ 4.95) with the entry into operation of Lotex and Fixed Odd Sports Betting, more than doubling the current national lottery market. That is, with the two modalities mentioned above, the ratio between the collection and the Gross Domestic Product should jump from the current level of 0.2% to 0.5% of GDP.

Fixed odds betting does not necessarily mean a large increase in resources allocated to the government: the goal is to inhibit illegality, promote the integrity of sport and improve the business environment.

Source: Games Magazine Brasil