Brazil seems to continue the uncertainty on the outcome of the gambling and betting regulation

Gambling Regulation in Process: To go by segments and stages, the Gambling regulation under Decree Draft 442/91, which covers all types of gambling both retail casino, bingo and gaming machines, as well as online casino, already approved by the lower chamber, is pending to be voted by the Senate and the new scenario suggest a more worrisome situation since the lower house and the senate do not have not much timeframe left due to the parliamentary recess and come Christmas vacation, and even though the composition of the new chambers might be under control of Bolsonaro’s coalition, the controversy between the legislative and executive creates more than an uncertain scenario difficult to evaluate.
 

• *One possibility is that the actual Senate will vote and approve the 442/91 regulation draft, which has been already approved by the lower chamber, and since the acting president is in place and has full power, can sanction the regulation prior to the recently elected Lula da Silva takes possession.
   
• *The new president can if he wishes, veto any legislation when he takes possession, something that becomes a high risk due to the background of Lula da Silva during his past mandates when he showed to be not in favour of gambling, and it was under his mandate that all bingo business was closed and during the following years during the two terms he was in power there was no intention to formulate a regulation for the industry.
   
• *On the other hand, during his winning speech, Lula da Silva, did assert that would respect legislation approved by the legitimate chambers, which can be interpreted that if the decree 442/91 is voted favourable by the Senate and sanctioned by Bolsonaro, he might respect its existence if he follows his words.
   

In any case these are just hypothesis that can be freely interpreted in favour or against and will not know the outcome as time passes and actions are executed if Senate proceeds to vote before it is dissolved and the voting is favourable, or as it has been happening for years, delays in the procedure void the voting taking place.
 

• *If the voting is delayed and the Decree 442/91 passes to the new legislative period under the new chambers ’s composition as a result of the recent elections, then we can expect a “new start” of the debate by the new Senate to decide what to do with the gambling legislation, which can end up either way; passing with a positive vote or not reaching the majority in favour; a third hypothesis is that it can be delayed and lost in translation for months or years.
   

In order to have a positive resolution, it is necessary that the Decree 442/91 receives the approval of both chambers before the end of the year vacation and chamber’s dissolving, in order to be ready to be sanction by the acting president, who on the other hand always referred to the possible approval of the law that he would veto and stop its execution.

The new composition of the Senate under Lula da Silva mandate does not seem to be so favourable to approve the gambling legislation.

This scenario of uncertainty is worrisome for the multiple incumbents who have invested and made its bet to the opening of the gambling and betting market in Brazil under the Bolsonaro mandate, which is running out of time and the forthcoming executive and legislative environment does not produce a better perspective to the possibility to have the gambling legislation in place in short term.
 

Sports Betting Regulation in Place: So much for the gambling segment, but if were to consider the sports betting situation we also enter in an uncertain scenario also impacted by the elections and its results, but also because the last minute change into the Ministry of Justice the responsibility to develop the regulation approved in December 2018, makes it also difficult to assess because being under an Economy Ministry has a different approach as been under a Justice Ministry more related to law and order and not as technical or business orientated as the Economy.

In addition, all the work done so far is now under scrutiny of the new Ministry, which itself represents a delay in the time frame for its regulatory development.

There is no signs that the development of the regulation  can be in place by the 12th December – 4 years after the law was approved – so we would have to see what develops within the deadline that represents the referred date.

A reasonable interpretation because of the new president Lula da Silva in power, is that we shall have to see what the attitude of the new government is regarding private sports betting business.
 

• *Different to the overall gambling regulation, which is still pending approval, the sports betting is approved and just pending its regulatory development, so it is a law, and its execution shall not represent a difficulty as part of any government procedure of an established law.
   

The scenario created by the approval of the sports betting law during the last 4 years has been of great expectation, with multiple steps forward taken by the most relevant sports betting companies, reaching agreements with local sports clubs, mostly sponsorship of practically all major football clubs in the country, representing huge investments, which allowed many clubs to make their budgets counting on the income agreed in the respective contracts.

Sports betting companies have moved on towards establishing in Brazil, with again huge investments and expenses to be ready for an expected but never happened sports betting legislation.

The consequences of a large delay or not implementation of the sports betting regulation will represent immense number of losses for many companies, whom at the beginning of 2022 were even hoping that the regulation would be ready for the World Cup this coming 20th November, which has not happened.

Very complex and worrisome scenario no matter how you look at it, adding the complexity of the Brazilian administration, mixed up legislative and more than doubtful executive, creates an scenario that we shall evaluate going back to what has not happened during the last 5-6 years when a supposed to be serious initiative to regulate gambling and betting started to move in the legislative chambers, specifically made commissions and many leading politicians and ministries displaying repeated defence of the implementation of the legislation which never happened.

Brazil is a difficult and risky market to enter let alone the regulation situation, because it will always be a challenge for any international company to enter the market and find the right local partner or liaison to have the needed economic, legal and regulation security.
 

What can be expected under the new executive and legislative scenario under Lula da silva

The prior actions during the two mandates of Lula da Silva do not bring positive waves towards regulating gambling, if he follows his past trend on the matter, ending with banning bingo operation which was a very important market at the time. Political corruption scandals, bribes and money loundering, was publicly known and did favour the decision of positioning against gambling.

Lula da Silva personally expressed his position against gambling and specifically against bingos which were the biggest business at the time.

At a point he was also in favour of establishing a regulation for some gambling activities, as the illegal gambling was present and not easy to tackle, but that never happened.

The World Wide approach to gambling regulation has evolved positively since the early 2000’s when Lula da Silva started his two mandates, to nowadays, and many countries, in particular in the Latin, Central and South America area, have evolved into establishing regulation for gambling and betting rather than prohibition, so being positive and using common sense, that shall be the best approach for the new government and its legislative powers but is too early to know.

The Brazilian scenario is complicated to read and take a good guess, normally is most probable that any guessing will not be aligned with the reality, and the forthcoming clash between Lula’s executive and Bolsonaro domain of the legislative will provide lots of uncertainty, which is nothing that anyone shall take by surprise in Brazil.

Indeed, this is not clarifying the future perspectives of gambling and betting in Brazil, but is descriptive of the situation, only hoping to best scenarios to happen changing the background facts, and the arguments of creating employment, incentivize the economy or provide more tax revenues for the treasure are topics that are normally lost in translation and do not have any impact on the politicians and decision makers,

In the meantime, there is an issue to be taking in consideration as it changed the monopolistic situation of the State thru Caixa General last year, by the ruling of the Supreme Court to end this monopoly and give states the prerogative to have their own lottery and “betting” products under equal terms as Caixa. 

This a situation that the government of Lula da Silva will have to live with, ending the state monopoly and allowing the different “regional states” to develop their own legislation decentralizing the lottery and betting products activity under the ruling of the decision of the Supreme Court.

This is already allowing some regional states to start developing their own regulation and compete with the national state monopoly.
 

Conclusión

While the uncertainty is present in the situation now and what can happened after January with new government and chambers in place, it is also possible that the new president will respect the laws approved by the actual chambers, and that will mean that if the Gambling Law draft 442/91 is finally approved by the Senate either Bolsonaro or Lula da Silva can sanction the draft as the law to be developed and implemented.

Same would apply to the sports betting development, as it is already a sanctioned law only pending its development.

In a normal country with no special controversy between the political parties, the situation shall be resolved with common sense and push the developments already in place, if necessary, with changes that suite the new government but not stop its implementation, but unfortunately we are not in a normal environment and therefore anything can happen, the good and the not so good.

I want to end with a positive view, which I do, again with “uncertainty”, considering the experience of go and stop and delays during the last few years since the gambling and betting regulation has been under debate, and I would not mind to be wrong if the version of the most optimists is what happens.

I suppose we have to wait and see, hope it is not too long, or at least not as long as the years we have been speculating with the possibility that Brazil can have finally the gambling and betting properly regulated.
 

Eduardo Morales Hermo
Director en iGamingco Limited and Senior Advisor at Ficom Leisure