The enthusiasm about the Brazilian sports betting market is something fantastic. Bookmakers of the most different nationalities and with licenses from the most varied jurisdictions are betting heavily on Brazil, the continental country with 26 states that has territories and population greater than European nations is the frontier to be pioneered by this market full of big players.
However, the enthusiasm, the competition, the hunger for brand consolidation and customer loyalty ends up blinding the market and hiding some major problems in the regulation of the sector in Brazil. Everyone is eager for regulation, and eager for their licenses, but the cost, income taxes on prizes paid, and the "new ideas" of Brazilian lawmakers may be issues that are not within bookmakers' probability calculations.
As is well known and widely discussed in the media, Federal Law 13,756/18 created a lottery modality called Fixed Odds Betting, a "Public Service" that could be authorized for companies interested in exploring the activity, this was the Brazilian way of legalize Sports Betting. But this legislative solution has become a traumatic problem for regulators. How to regulate something that in law is a lottery, but in practice is a sportsbook? Also, how would they reconcile the different forms of collection and taxes, in a way that is economically viable for investors and at the same time meets the expectations of tax collection?
It seems that the work of the last four years has been showing results, much more than sports betting, Gambling and bets as a whole are one of the ideas that are truly becoming popular, Bill 442/91, the Legal Framework for Gaming, is an issue of time. After the 2022 general elections, before the end-of-year legislative recess, or in the first half of 2023, probably in less than a year all betting modalities will be allowed in Brazil.
But here I need to give due warning to navigators, the general perception, of public regulatory bodies, and especially of legislators, is that the sports betting market is a great "sea of money", a market full of money that never ends. Everyone observes the 19 of the 20 clubs of the "Serie A" of the Brasileirão sporting betting houses on their jerseys, advertisements of all kinds in the specialized and non-specialized media.
Part of the booklet for the regulation and legalization of sports betting went through this discourse, that there is a lot of money "not being collected by taxes", and until today it is not, due to the main factor that there is no decree regulating the activity, and even if without this regulation, the flow of ideas from the legislator continues to ferment ideas of easy money to be accessed "and to fulfill the benefits of the State."
Recently, the PEC for the Salary Floor for Nurses was approved, a measure that seeks to increase the minimum wage for nurses, however it has a fiscal impact on public accounts of R$16.3 billion. In order not to be a true fiscal governance disaster, the Senators linked the balance of accounts with future tax revenue from casinos. This was one of the first demonstrations of the directed use of resources that don't even exist yet, to provide benefits to some corporation or politically organized group.
When it comes to the legalization of the gaming sector, everything still seems to be a not so clear future as to how it will be regulated and taxes will be collected and distributed. However, in sports betting things are different, there is already a law in force and a way of distributing resources. Today it is already clear how much goes to the government and how much will be distributed in support funds and specific destinations, but the average political mind still conceives the sector as a source of resources to please its bases, and favorite groups.
Thus, two novelties have taken place in the last few days in the legislative field. One is the overthrow of the presidential veto on the Aldir Blanc Law, which allows for a 3% increase in collection obligations on the net revenue of lottery and sports betting operators. Another was the new text of the General Sports Law, which increased the collection obligations of Sports Betting by another 1%.
Translating to the common terms of the bookmakers, taxes on GGR (Gross Gaming Revenue) went from 5% to 9% in the same week due to two different bills, and all this for the benefit of more organized groups such as the artistic class and sports confederations.
In addition, restrictions were also created, with bookmakers obliged to negotiate with the sports authorities for authorization to make their odds available on the sporting events they represent. Something blatantly unconstitutional by Brazilian jurisdiction, but a demonstration of the corporate power that other pressure groups have in the Brazilian political environment.
And here it is worth a reflection: while the different segments of society actively participate in the national congress, proposing solutions to their problems through sports betting, who is talking and clarifying the challenges and interests of the betting houses? There are issues that must be dealt with on a sectoral scale, a single representation, which speaks a minimum common denominator between what is in the interest of all operators.
Public notes, proposals for legislative changes, inspection and contribution to regulatory aspects, formal representation in public hearings and debates of ideas in the National Congress, technical notes and even the interpellation of lawsuits to question any abuse of public entities, if necessary, not to compromise and expose any of the operators unnecessarily, but rather to represent the segment as a whole.
If there is no minimally organized and legitimate relationship to punctuate and demystify the functioning of the sector, to show that it is indeed a rich market, but all money is scarce, and even the most virtuous economic segment has regulatory limits, and as I have already heard, " in terms of the regulation of sports betting in the world, there is no shortage of sad stories", a frank and open conversation is necessary so that the Brazilian case does not become one of these stories.
Rodrigo Gitaí
Managing Partner at RG Political Intelligence
