September 18, 2023

Gambling bill passes in Brazil – One final step ahead

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Gambling bill passes in Brazil – One final step ahead

Gambling bill passes in Brazil - One final step ahead

Last week Brazil’s Chamber of Deputies has approved the newly introduced gambling bill, which legalizes online sports betting and online casinos. This means one of the final steps has been taken in a long process to regulate online gambling in the country.

Online casinos and sports betting will be legalized

The provisional measure which has been set by President Luiz Inácio Lula da Silva in July will be replaced by Bill 3,626/23. This bill was quite controversial and had been changed many times, but last week the final version was finally presented by deputy Adolfo Viana.

With the new bill online casinos and online sports betting will become legal in the 10th largest economy of the world. Betting on fantasy sports is still not legal since it is added as a special exemption in the bill.

Now the bill has passed the lower house it will be send to the Federal Senate, which will have 45 days to comment on the bill.

Important changes in the bill

The new law showed some important changes from the provisional measure. Foreign companies will be excluded from offering regulated online gambling in Brazil. Only businesses incorporated under the Brazilian law, with a headquarter and administration in the country, will be able to get a license.

What the final impact of this change will be is still a bit vague. Foreign operators might be able to enter the countries online gambling market by partnering with a local hero, or by using a different subsidiary to comply with the new requirements.

Other important rules in the bill show that operators will need to be member of the sports integrity body, have a minimum value of share capital, and should pass various other technical requirements.

Introduction of a 18% revenue tax

Operators that will be licensed will be subject to a 18% revenue tax. According to many critics this rate is too high since many additional taxes will be charged. After the addition of the additional taxes such as PIS, Gaming Monitoring Fee, COFINS and ISS, the final tax rate can go over 30%. Which will put a lot of pressure on the financial management of the online casinos and sportsbooks.

To obtain a license operators will need to make a big investment. The standard license fee will be $R30m (£4.89m/€5.69m/$6.10m). With this license operators can offer gaming through one betting app or platform. For any additional offerings operators will need a separate license. Each license will be valid for 3 years, after which they will need to be renewed.

On top of a big financial investment for the license operators will also need to uphold very strict financial rules. They need to put in place anti-money laundering preventions and counter-terrorist financing policies. Additionally safer gambling obligations will also be very important according to the new bill.

The money that the government receives from the gambling tax and license fees will be used for several causes. About 2% will go to social security, which is significantly lower than the 10% in an earlier bill. Another 1,82% will go to the Ministrety of Education, 6.63% to sports and 5% to improvement for tourism.

Part of the 18% revenue tax will be used for tourism

No more bonus bets available

The new bill will put an end to bonus bets, which have been very popular in the gambling industry since a few years. After for example the Netherlands and the United Kingdom Brazil is just the following country to ban bonus bets, even as part of promotions.

It will also be prohibited for operators to offer bettors any form of credit lines. This rule is implemented to protect vulnerable players which might overspend and be put in financial troubles.

Big step to counter the grey market

Currently many operators are active in Brazil although they have no license yet. These operators will be banned from advertising in the country when the licensing structure kicks in.

Licensed operators that do advertise will need to comply with strict guidelines. Any operator that breaches these guidelines will risk being punished by the Ministry of Finance.

An extra step to counter the grey market is to add new payment rules to the bill. Only operators authorised by the Central Bank will be permitted to offer payment services. This should make it harder for offshore gaming companies to offer payment solutions to their customers.

Final steps to legalise online gambling in Brazil

The approval of the bill marks one of the final steps to legalize online gambling in Brazil. The politicians in Brazil are already working on solutions to regulate online gambling since far before 2018. But due to many political events it proved to be very hard to place the required laws in action.

Now only the passing in the Federal State will be the final step to regulate online gambling in Brazil.

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