Brazil’s President publishes executive order on sports betting

On July 25, 2023, the Brazilian government issued Executive Order No. 1,182 to amend Law No. 13,756/2018, which regulates fixed-odds sports betting. This law defines fixed-odds sports betting as bets linked to real-world sporting events in which players know how much they stand to win at the time of placing the bet (in the event of a correct prediction).

The executive order states that companies will either require authorization, a concession, or permission from the Ministry of Finance in order to run sports betting operations in Brazil. The Ministry of Finance must also regulate the conditions for obtaining such licenses, including license fees and the applicable procedures.

What does the executive order change?

Regarding taxation, the executive order determines an 18% tax rate on Gross Gaming Revenue (GGR) – the revenue betting operators obtain from all games after paying out prizes to players and the applicable income tax on the prizes.

Financial sums collected from the taxation of betting operators are to be distributed as follows: 10% directed to funding social security; 2.55% to the National Public Security Fund; 3% to the Ministry of Sports (until July 24, 2028; after this deadline, the funds must be directed to the Brazilian Treasury, which the federal government may freely use); 1.63% for Brazilian clubs and athletes; and 0.82% for basic education.

The following tax-related changes have been introduced:

• Until July 24, 2028, 3% of tax revenues will be allocated to Brazil’s Ministry of Sports – this was not provided for in the previous legislation;
• 63% of tax revenues will be allocated to entities within the National Sports System (clubs), as well as to Brazilian athletes or athletes linked to Brazil-based sports organizations (previously, this amount was allocated to Brazilian sports entities) in return for the use of their names, sports nicknames, images, brands, emblems, anthems, symbols and similar assets in fixed-odds sports betting operations;
• A maximum of 82% to cover the running costs of the fixed-odds lottery operators (reduced from 95%);
• A 10% social security contribution tax rate for real-world (offline) and online bets – the rate was previously 0.10% for offline betting and 0.05% for online betting.

There are no changes to the income tax levied on winnings, which remains at 30%. An inspection fee provided for in Article 32 of the 2018 law (varying from BRL 54,419.56 to BRL 1,944,000 depending on the sum of the monthly prizes) has also been maintained.

Executive Order No. 1,182 also determines:

• There is no limit imposed on the number of licenses the Ministry of Finance can grant;
• Legal entities must be duly established in Brazil to apply for a license;
• Betting operators (and their subsidiaries and parent companies) are prohibited from acquiring, licensing, or financing the acquisition of rights to sporting events held in Brazil;
• The Ministry of Finance will regulate advertising, which may be complemented by the National Advertising Self-Regulation Council (Conar). As of a specific date (to be determined by the Ministry), operators that are not authorized to operate in Brazil will be prohibited from advertising and publicizing their services;
• Internet application providers and connection providers must block websites and delete applications that offer unauthorized betting upon being notified by the Ministry of Finance. In the same vein, other companies that disseminate or advertise betting services must remove or take down irregular campaign material upon being notified by the Ministry;
• The Ministry of Finance must regulate the form and process by which operators will be authorized to make use of intellectual property rights and the image rights of athletes, as well as the names, brands, emblems, anthems, symbols, and similar assets of sports organizations;
• Betting operators must adopt security and integrity mechanisms and must report suspicious events to the Ministry of Finance;
• The Ministry of Finance may suspend or prohibit certain types of bets related to specific events of football (soccer) matches in order to mitigate match-fixing; and
• Only institutions that are authorized to operate by the Brazilian Central Bank (BCB) are permitted to provide transaction accounts that participants can use to make payments for fixed-odds betting and payment of prizes.

The Ministry of Finance will also be responsible for further regulations, supervision, and inspecting operations.

Violations and fines

Violations of the law or regulations will be investigated through administrative sanctioning proceedings. Penalties include fines of up to BRL 2 billion, the potential revocation of authorization to operate, and being prohibited from obtaining new authorization for up to ten years, among others.

Executive Order No. 1,182 became effective on July 25, 2023, as an ordinary federal law. However, a congressional commission will need to vote on converting it into law on a permanent basis within 120 days. If there is no vote by that date or the executive order is rejected by Congress, it will cease to be effective. The bill linked to the executive order is currently awaiting the designation of a rapporteur and the members of the commission that will be responsible for analyzing the executive order in Congress.

The mixed congressional commission may present and propose amendments to the executive order’s text.

For further information on this topic, please contact Mattos Filho’s Entertainment practice area.