Brazil’s Ministry of Finance publishes ordinance regulating sports betting
Ordinance No. 1,330/2023 establishes conditions to run fixed-odds sports betting, including a requirement for companies to submit an expression of interest if seeking to obtain a license in Brazil
On October 27, 2023, Brazil’s Ministry of Finance issued Ordinance No. 1,330/2023, which concerns the exploitation of fixed-odds sports betting. The ordinance was issued based on Law No. 13,756/2018 (as amended by Executive Order No. 1,182/2023), which established that the Ministry of Finance is responsible for regulating the activity in Brazil.
The ordinance establishes general conditions for the commercial exploitation of sports betting in Brazil. It also regulates general rules on the players’ rights and obligations, the prevention of money laundering and other crimes, responsible gaming measures and advertising.
Companies looking to commercially exploit sports betting must first demonstrate they are legally, economically, and technically qualified to do so and must also demonstrate good standing from a tax and labor standpoint. Although the Ministry of Finance still needs to publish specific regulations outlining the conditions and procedures for companies to obtain authorization, among other requirements, Ordinance No. 1,330/2023 already provides that:
- Establishing a subsidiary in Brazil (in accordance with current legislation) is one way foreign companies may receive authorization;
- The interested company must prove the financial resources that make up its share capital are lawful in origin. It must also demonstrate the suitability of the legal representatives, partners, ultimate beneficiaries, and occupants of strategic positions at the company;
- In the event of online betting services, the platform must meet technical and operational requirements that the Ministry of Finance will define, and must be certified by a Ministry of Finance-recognized laboratory;
- A person must be designated in charge of each of the following areas: accounting, data security, ombudsman, operational security and integrity, and compliance.
As well as complying with the Ministry of Finance’s requirements and conditions, the ordinance determines that certain companies cannot obtain authorization. This includes companies that have had their authorization(s) revoked in other jurisdictions within the last five years or that hold a direct or indirect stake in sports entities.
Prior expression of interest
Companies interested in obtaining authorization may submit a non-binding prior expression of interest to the Ministry of Finance within thirty days of the ordinance’s publication (until November 25, 2023).
The expression of interest must be sent to the Ministry of Finance’s Department of Lotteries (Coordenação-Geral de Loterias do Ministério da Fazenda), together with a declaration and a form in accordance with the format established by the Ordinance. Local companies must also submit their articles of incorporation, bylaws, or commitment to establish a Specific Purpose Company (SPE), whereas foreign companies must submit a commitment to establish a corporate entity in Brazil.
Companies that submit their expression of interest in accordance with the ordinance will have the analysis of their authorization requests prioritized when the period for submitting applications opens.
Rights of bettors
Operators must provide clear information about available bets and criteria for winning, including how to place bets, the fixed odds established for each bet, where and how to redeem prizes (which must be paid into the bettor’s bank account), the financial balance in the bettor’s account with the company, and the company’s name, email, and contact phone number.
The operator must run a Brazil-based bettor service center, with free online and telephone channels (available in Portuguese) operating twenty-four hours a day, seven days a week.
In order to place bets, a bettor must be identified by their full name, date of birth, and identification documents. The operator must have internal control mechanisms and systems that allow the bettor to establish limits, pause periods, and exclude themselves from the service.
Without prejudice to other restrictions and guidelines issued by the Brazilian Council for Advertising Self-Regulation (Conar), Ordinance No. 1,330/2023 determines that certain advertising actions pertaining to sports betting are prohibited, including advertising that:
- Conveys misleading statements to consumers about the probability of winning or the possible winnings that consumers can expect;
- Appeals to consumers to increase the frequency of their betting or the financial sums bet;
- Suggests or infers that a bettor’s skill can influence the outcome of a sporting event.
Advertising must include warnings about the potential harm of gambling, and display a ‘Gamble Responsibly’ message (or similar) in accordance with the ordinance’s specifications.
Money laundering prevention
In the event a betting operator detects any crimes provided for in the Brazilian Money Laundering Law (Law No. 9,613/1998) or any activities related to such crimes, Ordinance No. 1,330/2023 obligates the operator to report them to Brazil’s Financial Activities Control Board (Coaf). Submissions can be made via the Coaf Information System – Siscoaf, as per the instructions defined on the portal.
In regard to measures for combatting money laundering and the financing of terrorism (AML-FT), the ordinance establishes that authorization to operate fixed-odds sports betting services is subject to proof of the existence of:
- An AML-FT policy that includes risk assessment guidelines on the subscription of transactions, hiring of third parties or other related parties, product development, private negotiations, and transactions involving assets;
- Criteria and procedures for identifying clients, beneficiaries, ultimate beneficiaries, collaborators, third parties and other related parties, as well as for keeping physical and/or electronic records of products and procedures exposed to the risk of being used for money laundering and the financing of terrorism;
- Procedures for identifying, monitoring, analyzing risks and reporting transactions that may suggest money laundering, the financing of terrorism, or the proliferation of weapons of mass destruction (or activities related to them); and
- Ongoing training programs that promote AML-FT culture and related qualifications in line with the respective functions of employees, partners, and outsourced service providers, specifically regarding compliance with Law No. 9,613/1998, Law No. 13,260/2016, and other applicable Brazilian regulations.
Bill No. 3,626/2023
With a 120-day deadline for analyzing Executive Order No. 1,182 fast approaching, the Brazilian government recently submitted Bill No. 3,626/2023 to Congress under a constitutional fast-track procedure. As well as incorporating the text of the executive order, the bill introduces further obligations related to the exploitation of sports betting.
The House of Representatives approved Bill No. 3,626/2023 in September. Given the fast-track procedure the bill is subject to, the Senate must analyze it by the second half of November to avoid blocking its own legislative agenda.
It should be noted that the Brazilian government considers this bill a priority among its economic measures for increasing revenue, and it must be voted on by the end of the year.