What we know about Brazil's gambling legislation

Earlier this month Brazil’s Congress passed new legislation aimed at regulating the country’s large unlicensed gambling market.

President Dilma Rousseff is expected to decide in the coming days whether or not to ratify the bill, and if as expected the legislation passes into law it would mark the biggest breakthrough for the industry in 70 years.

There is no doubting the size and potential of the market with an estimated eight million punters currently gambling online in the country, primarily with offshore unlicensed operators.

eGaming Review spoke with Neil Montgomery, founding partner of law firm Montgomery & Associados in São Paulo, to outline four key points from the new legislation.

The nature of the online offering is still unclear

Of most interest to online operators is a provision in the Bill of Law to introduce what has been described as a “fixed-odds sports lottery”, but Montgomery said the bill fails to clarify exactly what that will entail.

“We will have to await the regulations to see whether indeed the new game/lottery is the same as fixed odds sports betting elsewhere in the world,” Montgomery said.

In terms of tax, the new game will likely be exempt from income tax, but there will be a 14% tax on funds raised from the offering, much of which will go towards supporting Brazil’s struggling football clubs.

There may be opportunities for foreign operators

Three groups are positioned to take advantage of the new licences. The Caixa Econômica Federal, the federal savings bank which currently holds Brazil’s lottery monopoly will certainly be involved, and may push for another monopoly on the new offerings.

But others should have a chance to bid for a concession. Licensed horse racing tracks are well positioned and there is also a provision to allow private operators to bid.

Montgomery said we will have to wait and see whether foreign operators are permitted to bid for the concessions, but it is likely they will have to form Brazilian subsidiaries to compete.

Offshore crackdown will target players, not operators

In a bid to crackdown on unlicensed offshore operators, an amendment has explicitly determined that using the internet to place a bet with an unlicensed operator constitutes a criminal act. Punters caught placing such bets will be subject to fines ranging from £400 to £40,000.

With several major operators active in Brazil, it will be interesting to see whether the changes force a rethink of strategy. “It is difficult to say whether foreign operators would reconsider their position,” Montgomery said. “If it is only the local player who could face penalties, then it may be that foreign operators will continue to look at Brazil as a market to target.”

This could be just the start

“I believe that if the bill of law does indeed become law this would be the most important legislative breakthrough for gaming and betting in Brazil in the last 70 years and could be the first step in a broader opening of the egaming market,” Montgomery said.

Attitudes to gambling appear to have liberalised with Brazil having hosted last year’s World Cup and currently preparing for next summer’s Olympic Games. The costs of these events, coupled with an economic slowdown, have also give the government a reason to seek new tax revenue streams.

“It shows that at least the government and Congress are viewing regulation of such an industry as being beneficial for raising additional funds, collecting taxes and generating jobs, especially in the days of Brazil’s current economic slowdown,” Montgomery said.