On December 12, 2018, Law No. 13,756 was enacted, by which “fixed-odd bets” were defined in the law as “betting system for sports-related events in which it is defined, at the time the bet is made, how much the bettor can earn if the prognosis is correct.” In other words, the law authorized sports betting in Brazil, allowing private individuals, upon authorization, to operate sports’ bookmakers’ in the country.
According to the legislation, the Ministry of Economy will be responsible for granting authorizations to bookmakers, in addition to preparing the regulation of the matter within up to 2 (two) years, extendable for an equal period. Throughout 2019, the Ministry conducted important initiatives to advance regulation, generating strong market expectations for the publication of the standard in 2020.
In this sense, the Ministry of Economy opened public consultation Secap nº1 / 2019 to collect opinions from the population to understand the expectations of the market before issuing a standard. Thus, the regulator showed interest in seeking contributions for the construction of the regulatory model, observing not only the best global practices, but also the singularities of the Brazilian market, having received almost two thousand contributions. Also, during the public consultation, the Ministry of Economy expressed its concern in the issue of a standard that brings modern practices of security, integrity, accountability, corporate social responsibility, fraud prevention and money laundering.
After the contributions obtained by the public consultation Secap nº 1/2019, the Ministry of Economy published in September 2019 the draft of the Decree for the Regulation of Sports Betting of Fixed Quota and called a new public consultation in order to collect contributions for the improvement of the wording of the draft of the standard in question.
The draft decree published by the Ministry of Economy presents important compliance measures to be observed by the bookmakers, establishing the minimum standard of information to be collected from each bettor, in order to reduce the cases of money laundering by the system of sports betting. Thus, the operator must obtain the complete identification of each bet, including full name, ID and CPF for national bettors and a valid passport for foreign bettors. In addition, any suspicious transactions should be reported to the Central Intelligence Unit of the Central Bank.
Another point that was already expected by the market, was the definition of the minimum age of 18 for bettors, in addition to the requirement that the bookmakers are legal entities or consortia of companies based in Brazil and with local administration. This measure requires international companies interested in accessing the Brazilian market to set up local offices, responsible for managing the local market.
With regard to authorization, the draft provides, among other ancillary obligations, that the bookmakers maintain a minimum reserve of R$ 6 million (US$ 1.45m) to meet the obligations, reducing the risks of insolvency. Although, in the first analysis, this fact proves to be interesting for the protection of the bettor, it creates a barrier of entry to the sector, which may hinder the entry of sports betting startups (btechs) in the Brazilian market.
The draft also provides for another barrier to entry, insofar as it prohibits granting authorization to bookmakers who have operated without authorization in regulated markets for the exploitation of lotteries. In this way, the Ministry of Economy could deny authorization to companies that already offer sports betting products in Brazil before the regulation was issued, even if they are based abroad, and that have accessed Brazilian bettors without an effective presence in the country. Such a measure contradicts the market's expectation of a possible granting of time for such companies to adapt to the new regulations.
Although the draft released by the Ministry of Economy presents several rules and guidelines in order to avoid money laundering and market manipulation, it is essential that the leagues organizing sporting events seek their own control mechanisms, through specialized companies, in order to monitor the results and bets to identify possible manipulations, as in more consolidated markets such as England.
The sports betting market is estimated to have moved worldwide approximately R$ 620 billion (US$ 148b) in 2019, with growth expected for the coming years as more and more countries, such as Brazil, have been issuing rules regulating sports betting in its territory and thus expanding this important sector.
Thus, we understand that, supported by good regulation, which brings the necessary security to the bettor and the bookmaker, the sports betting market can be a great generator of income and jobs.
Rodrigo Caldas de Carvalho Borges
Partner at CB Associados, president of the Commission for Startups and Entrepreneurship at OAB Pinheiros / SP
Marcos Nóbrega
Visiting scholar at Massachusetts Institute of Technology (MIT), professor at the Faculty of Law of Recife (UFPE)
Source: Estadão
