2020 tends to stand for history as the year of revolution in the Brazilian betting market. Not that the last two exercises left anything to be desired. They were lavish in advancements. In 2018, we were thrilled with the enactment of the Law that authorized fixed-odd sports betting in Brazil. For the market to be expanded, it is now necessary to regulate the law. In 2019, this perspective was ratified, and the segment's draft legislation became the subject of two public consultations throughout the year.
For 2020, the prognosis is that the effective publication of the regulation will occur. There are still relevant points of legislation to be resolved to accommodate the perspectives of companies in the sector. The main one concerns the tax on segment operations. Today, Law No. 13,756 establishes a 3% rate on online operators' turnover - a rate considered high and capable of preventing or decelerating investments, according to industry executives. Because unlike lotteries, online betting prizes tend to be more recurring, though lower in financial terms. In the modality, the statistical chance is that bettors will receive 90% to 92% of the stake back as a prize, which makes the rate of 3% under heavy revenue.
Revision of the item is considered crucial, but there is no consensus on the possibility of success. On the one hand, some see a reduced chance of change throughout 2020, given the political movement of the year determined by the municipal elections. But the most optimistic believe that both the Executive and the Legislative act with the vision of improving the tax and competitive environment and will carry forward the project of tax reduction. The government, in this hypothesis, would work with a new tax rate of around 1%.
In addition to concerns about the tax burden, a second item focuses the attention of market entities: the government's decision whether or not to punish illegal operators who act in breach of regulation. Potentially, letting them act unrestricted would imply unfair competitive advantage.
Whatever the future of these two points, we are facing a highly positive picture. The most optimistic believe that by the first quarter of 2020 the total regulation of the segment will be determined, according to recent statements. Representatives of the Brazilian government and businessmen will participate as speakers at the ICE conference in London, the most relevant of the sector's events worldwide, which will take place from February 4th to 6th. They will talk about the new perspectives for Brazil for international investors.
Most importantly, with the definition, the final foundations of the Brazilian online betting market will be given. It is a high potential segment. Today, the sector moves, according to data from consultancy KPMG, R$ 800 million (US$ 195m) per year. Within four to five years of its establishment, also according to the consultancy, the segment can reach the mark of R$ 6 billion (US$ 1.46bn) a year only in sports-related bets, such as turf and football.
This means that developing this market means increasing tax collection by 7.5 times - something extremely beneficial for the government's cash. The amount also contributes to attract foreign investment to the country and for strategic players in the sector to put their chips in Brazil and plan strong growth in the local market. This factor was responsible for determining the first acquisition of a Brazilian online betting company by a traditional international player.
SUAPOSTA, the first and only fully licensed sports betting operator in Brazil, is now part of the Swedish Betsson Group, one of Europe's largest I-Gaming players and one of the world's top five online gambling companies.
Led by Brazilians, SUAPOSTA will be one of the protagonists of a competitive, transparent and sustainable local betting market, where government, society and operators will interact in a win-win relationship.
In addition to the tax collection gains, Brazil will have the advantage of having players operating in the country with practices and methods already tested, established and focused on market sustainability. The tradition and half-century experience of the Betsson Group, for example, contribute to the Brazilian market being born with the mark of extreme security to avoid the compulsion in games.
Thanks to digital tools, company systems can identify compulsive behaviors and establish control modes, such as blocking access to new bets by family members. The legislation itself tends to bring items on the theme, helping to build the segment on a solid basis and considering the best international practices. For all that, the online gambling market welcomes 2020, the year in which we will lay the groundwork for an industry capable of entertaining and at the same time generating income and supporting the country's development.
Andre Gelfi
Suaposta Managing Partner
