Roughly eight months after the regularization of sports betting in Brazil, the companies holding licenses granted by the Secretariat of Prizes and Betting/Ministry of Finance are preparing for the next stage: market consolidation.
On one hand, they still have the opportunity to develop profitable businesses (which could change if the government insists on overtaxing the activity). On the other, ‘Bets’ must overcome operational, corporate, tax, regulatory, and governance challenges. Moreover, they must also “burst the bubble” of strong prejudice against fixed-odds betting and iGaming, widely available through online apps in Brazil.
In our view, much of this prejudice has been fueled by misleading advertising of “easy winnings,” which distorts the true entertainment nature of sports betting, reducing it to a villain accused of contributing to gambling addiction, despite the existence of responsible gaming mechanisms.
The licensing model adopted by the Brazilian government granted three brands (bet.br domains) to each licensed company/CNPJ, creating a parallel—and somewhat speculative—market for trading brands/“slots.” This is risky from the perspective of corporate governance, as well as corporate and tax law, since for now there is no provision for the formation of consortia or the effective segregation of the responsibilities of administrators and the operating results of each brand.
Furthermore, several operational and technological issues still need stabilization. Not all ‘Bets’ have their own consistent technology or the resources to implement sophisticated controls, such as user access restrictions for those banned from betting, systems to block hyperlinks of irregular ‘Bets’ that copy their brands, and other necessary features to comply with Law 14.790/23.
The absence of a unified registry of players prohibited from betting, along with missing regulations for some provisions of the law, makes compliance more costly and slower for licensed ‘Bets’, giving irregular operators an advantage and reinforcing the stigma against gaming—even when responsibly managed.
Finally, the implementation of tax compliance by licensed ‘Bets’ remains slow, due to several factors, including:
-The collection of the 12% contribution on GGR[1] still requires clarification. Although Law 14.790/23 stipulates that 7.3% must be allocated to entities of the National Sports System and Brazilian athletes (or organizations linked to them) in exchange for the use of their names, images, brands, and symbols, there are no clear rules yet on who should receive the funds or how the payment should be carried out.
-‘Bets’ are subject to supervisory fees payable to the Secretariat of Prizes and Betting, but proper oversight of licensed operators is still lacking, let alone of irregular websites and financial operators. The only step forward has been an agreement with Anatel to accelerate the blocking of irregular ‘Bets’.
-In less than a year of regulated activity, the federal government raised the GGR tax base by 50%—from 12% to 18% starting in October. Combined with other conventional taxes (IRPJ, CSLL, PIS, Cofins, ISS, IOF), supervisory fees, and the upcoming selective tax, this will erode profitability, discourage foreign and domestic investment, reduce job creation, shrink overall tax collection (especially on profits), and open more space for irregular ‘Bets’.
-Many ‘Bets’ have foreign shareholders and investors who are still learning Brazil’s complex tax system and building their legal, tax, and accounting teams. This exposes them to higher risks of non-compliance, including potential liability for unpaid taxes by their national and international suppliers.
-Regarding tax compliance, ‘Bets’ must also prepare for Brazil’s upcoming tax reform, including creating appropriate product and service catalogs aligned with destination-based tax controls for their service users.
As can be seen, these brief considerations reflect only a fraction of the many corporate governance issues affecting the sector. In our view, operators must pay close attention to the nuances of Brazilian legislation and the rules of the Secretariat of Prizes and Betting in order to structure efficient tax compliance frameworks. These are essential to safeguard the interests of ‘Bets’ and their shareholders, avoiding significant financial losses and future contingencies that could negatively impact business activities.
[1] Gross Gaming Revenue (gross revenue minus prizes paid)
Fernanda Drummond Parisi
PhD and Master in Tax Law from PUC-SP, partner at Drummond Parisi Advogados, and director at ABDF.
Márcio Adolpho Quixadá
Corporate lawyer in the iGaming industry, specialist in Financial Management (FGV-SP) and Corporate Governance (Harvard Business School).
