Almost four years ago, Brazil instituted fixed-odds sports betting as a public service. At the time, the legislator's concern to contemplate an activity that was already relevant around the world was celebrated, with a large volume of operations, revenues and, consequently, collection by governments.
The characterization of sports betting as a public service caused some surprise, it is true, but in doing so, Law 13.756/18 reaffirmed the relevance of this activity. It was therefore expected that the two-year period for regulating the authorization to be granted by the Ministry of Economy would be a priority. After all, not only is it a public service, therefore, of special interest, but the benefit from tax collection was openly expected.
However, inexplicably, not only the original term has expired, but also the extension provided for by law is approaching its end. It is not known why almost four years have passed without the regulation being finally made. And it was not for lack of initiatives. During this period, the structuring of concessions was considered, with the inclusion of the service in the list of priority projects of the PPI, mandating the BNDES to structure the contracts. Now, the last information we have is the Government's preference for the authorization model, as referred to by law.
The governmental inertia, until now, has caused a double loss for the country, heightened in times of scarcity of resources and economic crisis. The regulation brings with it the collection of taxes and, on the other hand, still allows the Union to obtain grant values by authorized companies. In the first case, it is estimated a collection of more than R$ 6 billion (US$ 1.1bln) a year. In the second, depending on the authorization model adopted, the granting by authorization can reach significant amounts.
This damage has been constantly pointed out, as well as the risks to the market and society due to the lack of regulation, but, even so, it was not enough for any attitude on the part of the government. As the legal deadline for regulation approaches, problems of a different order arise.
The passage of the period of regulation without this being carried out gives rise to an environment of legal uncertainty for the government, for companies in the sector and for users, in addition, of course, to the perpetuation of the loss of revenue. At first, there is uncertainty about the possibility of companies offering services even without formal regulation. After all, we are not talking about illegal provision, as there is already authorization in law for fixed-odds sports betting.
However, it is unequivocal that companies that are willing to provide the services may be questioned due to the absence of formal rules for placing bets. In this context, the risk of repressive measures and sanctions in administrative and judicial proceedings cannot be ruled out. On the other hand, it is possible to consider a more proactive stance on the part of companies, which can remedy the absence of authorization in court. Especially by writs of injunction or even in writ of mandamus, if administrative requirements for authorization are denied by the Ministry of Economy.
In any situation, transaction costs will be high, either due to legal uncertainty or due to administrative and judicial efforts. Instead of taking advantage of the benefits that regulation brings, the Union would end up bearing the losses of its own inertia.
From which it can be seen that, from any angle, abdicating from regulation places the country outside a global market, where the movement is precisely in the opposite direction. Not only in Europe and the USA (where the discussion of regulation is increasingly lively), but also in Latin America, in countries like Mexico and Colombia, in addition to the city and province of Buenos Aires, there are already formal and clear rules for the carrying out sports betting. The unjustified refusal to regulate something already provided for by law relegates Brazil to a disadvantageous condition, preventing it from enjoying the resources collected and, even worse, feeding an informal market, with all the associated damages.
There is still time to avoid this (more) disastrous scenario. It is known that the regulation has already been sufficiently discussed within the scope of the Ministry of Economy, which allows its implementation even in the few remaining months until the end of the legal term. The edition of the decree is the last act missing and nothing prevents it from being finally put into practice.
Caio de Souza Loureiro
Doctoral student and Master in State Law and partner at TozziniFreire Advogados
Claudio Coelho de Souza Timm
Master in capital market law and financial regulation from Georgetown University (USA) and partner at TozziniFreire Advogados
Jun Makuta
Specialized in economics and company law from FGV and partner at TozziniFreire Advogados
