GMB – The Minister of Finance, Fernando Haddad, announced that the regulation of sports betting will arrive shortly after President Lula returns from a trip to China. Do you believe that we will finally have the long-awaited Provisional Measure to bring legal certainty to the activity?
Fabiano Jantalia – I believe so. Firstly, because the debate is quite mature, as we have been discussing this over the last four years. And the industry engaged in this movement, with representatives of the main players, especially those of international scope. With the change of government, there was a change in focus on the issue of gaming, now much more pragmatic.
What we have seen since January 2023 is that the debate has been placed at the center of the regulatory agenda and I think we have a good chance of having an instrument. Originally, it would not have been necessary to have a Provisional Measure (PM) to regulate Law 13,756. All that was needed was an Ordinance from the Ministry of Finance. But the choice of the MP is very happy because the matter is more than urgent. We have an industry that is eager to start its activities and secondly, because the PM has an important characteristic, which is the requirement of “urgency” and “relevance” requirements.
What do you expect from the document that will be presented by the Ministry of Finance?
First, I hope it reflects the entire debate that has been brewing over the past four years. The sports betting industry in the world is marked by a lot of technical complexity, as well as gaming in general. So, there's not much room to invent the wheel. What I hope is that the PM draws on international experience and picks the best models, analyzing Portugal, France, the United Kingdom and the United States. Thus, if we manage to combine good international practices in the Provisional Measure, Brazil will have a 2.0 regulation for sports betting and will serve as a reference for the rest of the countries.
The issue of taxation is always an open question in light of the government's appetite for revenue. Do you believe that adequate taxation will come and that may allow more players to settle in Brazil?
I'll start at the end of your question. Taxation will be the great watershed of the attractiveness or otherwise of the betting market. We cannot allow ourselves the luxury of making a mistake and thinking of the sector only as a tax collector. The gaming and betting market needs to be seen in terms of the potential for growth and economic development that it will provide: job and income generation, new contracts, new companies, more sponsorships and more events, which will promote the circulation of wealth.
What I think is that we have a well-established model in other countries of how taxation should be done. If we adopt the taxation model as a common income identical to the one we declare to the Income Tax, the treatment becomes complex, not generating such good results. Another model is the taxation of bets as a capital gain, in which compensation is allowed not only for prizes, but also for the amounts lost by bettors. Then we would have a more balanced formula. It is important that the voracious collection does not compromise and does not close the large window of political, economic and financial opportunity that we have at the moment.
There is also talk of prohibiting companies that are not established in Brazil from advertising and sponsoring clubs. How do you rate this measure?
I think it's positive. The restriction on advertising in Brazilian law is nothing new. We have restrictions on a number of advertisements or rules regarding beer and cigarettes. But if we think holistically, if the Brazilian legislator proposes to open the gaming and betting market and make an effort to place many agents in the country, we cannot allow others, who do not receive this authorization, to compete even unfairly. This measure is important in that it prevents unfair competition and that bad agents compete on equal terms with good agents.
Even in the face of the lack of more concrete data on the sector and still without regulation, can you estimate how many bookmakers operate today in the Brazilian market?
This number is very variable, as strictly speaking we do not have any bookmakers operating in Brazil, as the bookmakers are based in jurisdictions where sports betting is allowed and whose sites can be accessed both by those who are in Brazil and by those who are in several other countries. What I might think is useful to consider is that at least one to two dozen sportsbooks would be able to qualify for the process in this first moment.
You talk about 10 to 20 bookmakers seeking their licenses, but today there are around 500 bookmakers operating outside Brazil. Would we reduce the number of operators for the Brazilian market in such a way?
It is one thing for you to offer a product or service on the internet that is not subject to a specific rule. It's another thing to offer a product that's subject to that rule and that has strict regulatory requirements like license pricing and stuff. I consider [as] a bookmaker the one that is structured and with a consolidated trajectory and a compliance program and not any site that simply receives bets. Due to my professional experience in new markets – due to my training, coming from the Central Bank – I followed the implementation of fintechs and IPs, for example. And the tendency is for everyone to run in search of a license.
But the regulator starts to set the tone and establish a series of requirements... So, I imagine that our bar will be a little higher than the average of other markets in terms of regulatory requirements. We're going to have a blast and great anticipation, but by the time everyone sits down to read the manuals and see the requirements to follow, we'll have the first filter. We will have the first supervisory actions by the regulator, which we still don't know who will be, and this will be the second debugging moment.
Is it possible to estimate how much the bookmakers move today in Brazil?
As a lawyer, I have talked a lot with market agents and in discussion forums. Based on what we see, I joke that it is from R$ 2 to 20 billion, but I think that a percentage in the range of R$ 8 to 10 billion for a starting point is a reasonable number. The numbers vary greatly according to the criteria used. We rely on information that is often shared confidentially. We try to gather these numbers and I think they are between R$ 8 and 10 billion in betting volume.
One of the aspects that worries me the most concerns the institutional structure of inspection. What will be the organ, entity or secretariat? I have an expectation that the government will take the opportunity to create a national gaming and betting authority or agency. It is not possible to conduct a minimally consistent regulation with a merely deconcentrated body. If the subject is important, it seems to me fully justifiable to think about this possibility.
The proposal is for a cost of around R$ 30 million for the licenses. How do you evaluate this number and where could the government have gotten this value from?
These data are surveys that we found, but I am not aware of the source of this number. It wasn't out of the hat, but I'll give you some parameters that lead me to believe that this number, if it's not adequate, is very close to it. For a commercial bank, a minimum equity of R$ 18 to 20 million is required and for a brokerage or a fintech, it is a little less. Traditionally, requirements for entry into the gaming industry have tended to be equal. Typically, the gaming industry has slightly higher requirements and capital requirements than those presented to smaller banks.
The betting industry is heavily regulated and needs a minimally organized structure for its exploitation and has very high compliance costs. So I think this number is reasonable to get the industry moving, make it mature and then assess whether the number is high or low. Maybe [if it was] a little smaller it wouldn't hurt. Between R$ 20 and 30 million I think is a reasonable number and more than that would not be interesting because it cuts too big and oligopolizes the sector, which actually needs competition.
One aspect that has been raising many discussions is about integrity in sport. So much so that three entities were created to deal with the issue and responsible gaming. What is your impression of these movements? Do you want to join any of them?
The responsible gaming movement comprises a set of practices and policies aimed at preventing the player from being placed in a hypo-sufficient situation and that he is induced to addiction, deceived or that he is somehow exploited by illicit practices. The responsible gaming movement is a reality in the world industry and I think it reaches Brazil very strongly and with the commitment of the players, who foresee self-restraint and self-exclusion, for example.
One of the things that the responsible gaming program seeks is to avoid player exploitation and one of the ways to do this is for someone to manipulate the results of sports competitions. One of the things that we can conceive of in the PM or even of the players themselves in the self-regulation movement, is the exclusion of bets with clubs that have a history of manipulation or that have been investigated or that do not even have an unblemished reputation.
I see this creation movement of the three entities as something very productive and that shows the commitment of the sector in “arrive arriving” and making a movement of setting the mark of morality and showing that they came to do the right thing. In relation to the three entities, it is a recent movement, but we are very interested in participating in the possible forums for discussing these subjects and we feel encouraged to contribute with them in some way to the debate.
As for the debate on regulation, do you believe that it should include clauses with guidelines and determinations in pursuit of sporting integrity and responsible gaming?
Yes. I think we're past the level of discussion. It is no longer regulation of betting. Regulating and breaking down into procedural or conceptual minutiae something whose legal standard is already provided for in a general law. We don't have that standard. The only thing we have in Law 13,756 is the concept of fixed odds betting. The current government is being very happy on the path it chose by opting for the PM, as we have already passed the regulation level and are now at the regulation level. We will establish the legal standards that will guide the actions of the body that will take care of the sector. We have some pillars to be observed.
The first is institutional. I consider it absolutely essential that there be a structure of a body that has the capacity to supervise. It's no use opening the sector to 30, 40 companies, or hundreds of operators, and putting half a secretariat to take care of it. It will not work.
The second concerns corporate practices. The PM needs to have corporate governance requirements. And it is necessary to establish technical requirements for this performance. I am not in favor of them being included in the Provisional Measure, but I defend the sector's self-regulation, which works very well in several countries, such as in the United Kingdom with the Gambling Commission.
In addition, it is essential that we have a set of rules related to operational practices, such as responsible gaming, money laundering prevention and integrity commitments.
With the regulation of sports betting coming out, will it be able to facilitate the processing of the regulatory framework for gaming in Brazil, which is shelved in the Senate?
I think so. Bill 442/91 ran for 21 years in the Chamber of Deputies because the main fight was against prejudice. And, even more, lack of knowledge of the whole set of measures and solutions that this industry, so large in the whole world, has conceived to attack its main evils and problems, such as, ludopathy and integrity. This journey so far in the regulation process and the one that will be established during the processing of the PM will bring a lot of critical mass and knowledge, demystifying prejudices, creating a clearer vision of the potential and benefits that this industry can bring to the Brazilian economy and especially for players, who will be protected from a legal point of view.
Source: Exclusive GMB