In Brazil, casinos and bookmakers have been banned since the 1940’s, and yet the act of placing a sports bet has a curious legal status. Although our 1940’s legislation prohibited the establishment of land-based structures to exploit gambling in Brazilian territory, the subsequent evolution of the internet has opened a legal loophole for foreign online betting firms to operate in a non-regulated “grey area”.
After decades of tolerating this legal loophole, Brazil is finally ready to regulate its whole sports betting market. Federal Law nr. 13.756 of December 2018 primarily regulates the Brazilian national lottery, but it also includes provisions to regulate sports betting (a category defined as “fixed-odds betting related to sporting events”) and its related tax revenue allocation. Pursuant to Article 29 of the Law, the “fixed-odds betting” category will be a public service, and the Federal Government will be able to issue licences to commercial operators, both online and in land-based structures.
Brazil’s Ministry of Economy now has two years – extendable for another two – to develop suitable regulations for the industry. Hence, the expectation of the industry is that the regulatory framework will be in place by the end of 2022.
In view of such legal transition, betting companies are paying close attention and are already positioning themselves to invest in the country. Whilst some operators feel comfortable to offer bets and take advantage of the Brazilian “grey market”, some of them anxiously await the regulation of the industry before making a move.
Irrespective of being a turnkey or a white label, many operators assume that the simple translation of their website into Portuguese would suffice to bring their operation to Brazil, but that’s not the case.
Brazilian public is completely different from other markets, even if we compare it with other South American countries – let alone European and Asian. The foreign operator has to adapt its operation to Brazil, or, in other words, “tropicalize their operation”.
“What the Brazilian bettor wants?”
That’s the main question to be asked; and the precise answer will only be given by local specialized professionals from the field. Two clear examples of this particular culture are the ‘boleto bancário’ (bank billet) and ‘PIX’ (payment method created by the Brazilian Central Bank for instant direct bank transfers), which are very common (and indispensable) payment methods used by Brazilian bettors to deposit money into the betting platform. The absence of such options would most certainly drive bettors away from the bookmaker.
Bringing an operation to Brazil consists in several steps, that vary in accordance to the investment the company is willing to make. Besides a clear understanding of the gambling complex legal situation, designing a website focused on the Brazilian public, hiring a solid and safe payment methods company, hiring an IT department to hold everything together and developing marketing strategies (such as affiliation, social media and even club sponsorship) to successfully reach Brazilian bettors are some of the many steps along the way.
Hence, it is very important for foreign operators to have connections in Brazil, especially with those who know the market from inside, follow very closely the regulatory process and have strategic partnerships capable of providing the operator with a roadmap of the business path that the operator has to follow in Brazil.
After duly observing the two previous aspects, it is time to consolidate the operator’s brand on Brazilian territory. Acquiring the confidence of the Brazilian public is certainly not an easy task, but it is indeed very rewarding.
For an operator, the closeness with its target audience on a daily basis generates confidence for those who wish to bet on sports, which in turn makes bettors comfortable on depositing money into their platform.
Such reputation will certainly come in handy when the regulatory framework is issued by the Ministry of Economy, in particular because there is a possibility that Brazil might limit the number of licences to be granted to operators.
Hence, by establishing its brand and acquiring the confidence of the public in Brazil, operators will have higher chances of being granted a licence when the regulatory framework is issued by the Ministry of Economy. “First come, first served”, you may say.
Conclusion
The global sport betting market is growing exponentially and operators are now paying close attention to the developments in Brazil given its sizable investment potential.
A report commissioned by the Remote Gaming Association (RGA) and conducted by KPMG in late 2017 estimated the offshore online grey market to be worth USD 2.1 billion annually in GGR (Gross Gaming Revenue) terms. A recent GamblingCompliance report estimated that a mature Brazilian online and land-based betting market could generate annual gross revenue of USD 1 billion for the country, subject to the introduction of a competitive licensing regime for online betting.
With all these statistics in mind, betting firms naturally study their possibilities to bring their operation to Brazil. Whether to start exploiting the current “grey market” right away or to await the regulatory framework before establishing its business in Brazil, the fact is that standing still will most certainly result in a lost opportunity.
Udo Seckelmann
Attorney-at-law at Bichara e Motta Advogados. LLM in International Sports Law at the Instituto de Derecho y Economía (ISDE) in Madrid, Spain. Editor and writer of Lex Sportiva, an international blog about Sports Law. Member of the National Academy of Sports Law (ANDD) – Youth Commission. Member of the Sports Law Commission of OAB/Barra (RJ).
