Brazil enacts law regulating sports betting and online games

On December 30, 2023, the Brazilian President assented to Law No. 14,790, amending Law No. 13,756/2018 to regulate ‘fixed-odds betting’ in Brazil.

The law allows companies to run fixed-odds betting operations in relation to sport events and online games, upon authorization from the Ministry of Finance. The law defines online games as ‘an electronic channel that enables virtual betting on a game whose result is determined by the outcome of a future event based on the random generation of numbers, symbols, figures or objects defined in the game’s rules’.

Companies authorized to exploit fixed-odds betting (operators) must comply with certain technical requirements and pay a maximum of BRL 30 million in fees for the privilege of making use of up to three commercial brands over five years.

The law also defines fantasy sports as those in which disputes occur in a virtual environment based on the performance of real people. Exploiting fantasy sports does not require prior authorization.

Some of the key aspects of the new law are highlighted below:

• Authorization requirements: The Ministry of Finance still needs to issue specific regulations on the minimum requirements for interested companies to be eligible for authorization. However, it has already been established that these requirements must provide for operators to have proven knowledge and experience in running games, bets or lotteries, as well as technical and cybersecurity requirements and minimum service capacity;
• Local ownership: The operator must have a Brazilian party as a shareholder holding at least 20% of the legal entity’s share capital;

• Forms of exploitation: Bets can be virtual (i.e., accessed via electronic channels) or physical (i.e., printed betting slips). The Ministry of Finance’s authorization will specify whether each operator can conduct both virtual and physical betting operations, or only one of these;

• Corporate policies: Operators must be able to show they have implemented certain policies, procedures, and internal controls to be eligible to obtain (and maintain) authorization. These policies, procedures and controls regard customer services and complaint channels; the prevention of money laundering, financing of terrorism, and the proliferation of weapons of mass destruction; responsible gambling; measures to prevent or reduce the effects of pathological gambling; and betting integrity and the prevention of match fixing and other related forms of fraud. The Ministry of Finance will establish requirements and guidelines for operators to observe when developing and assessing the effectiveness of such policies;

• Taxation of operators: The tax rate applicable to operators is 12% on gross gaming revenue. It is worth noting that operators will also be subject to corporate taxation (IRPJ/CSLL/PIS/COFINS/ISS);

• Taxation of bettors: Net prizes obtained from fixed-odds and fantasy sports bets will be subject to Personal Income Tax (IRPF) at a rate of 15%. The original bill provided that prizes up to BRL 2,112 (the limit of the lowest IRPF tax bracket) would be exempt from taxation, which the President’s Office vetoed. Provisions that determined the verification, calculation, and annual payment of IRPF on net prizes were also vetoed, as they provided for a different tax treatment from other lottery modalities;

• Players’ rights: Players must receive clear information about the financial risks of losing bets and pathological gambling, as well as the conditions and requirements for making predictions and determining prizes. The use of ambiguous, abbreviated, or generic writing during the betting process is prohibited. Operators must also make Portuguese-language customer service channels (telephone or online) available to customers free of charge;

• Match fixing or corruption: Any bets proven to have stemmed from match fixing or corruption in regard to sporting events will be declared null and void;

• Payments: Payment arrangement issuers and financial and payment institutions are prohibited from permitting transactions linked to bets with unauthorized operators. As per the guidelines established by the Ministry of Finance, authorized operators must implement internal bet analysis procedures with monitoring and selection mechanisms to determine whether bets show any signs of money laundering and/or terrorism financing. They must also report any transactions that raise suspicions of money laundering and terrorism financing to Brazil’s Financial Activities Control Board (Coaf);

• Inspection fee: Operators will be charged a monthly inspection fee based on their net revenue (ranging from BRL 54,419.56 to BRL 1,944,000.00).

Gambling advertising rules

The new law establishes that the Ministry of Finance will regulate advertising and marketing activities, though companies are encouraged to self-regulate. The Ministry may demand application or connection providers and other companies involved in promoting betting to block electronic sites and delete applications and/or irregular campaigns, as applicable.

The Brazilian Council for Self-Regulation in Advertising (Conar) recently approved Annex “X” of the Brazilian Self-Regulation Advertising Code to complement these new gambling advertising rules. Taking effect on January 29, 2024, the Annex is based on various consumer protection principles, including advertising identification, truthful presentation and information, protecting children and adolescents, social responsibility and responsible gambling. Among other provisions, the Annex determines that:

• Consumers must be able to easily identify advertising, including when carried out by influencers on social media. Advertising must clearly indicate the company responsible for the advertising message, authorization ID and contact information;

• Advertisers’ social media profiles must be officially verified;

• Advertising must not suggest that betting can lead to financial enrichment nor present misleading information about the probability of winning;

• As a measure to protect minors, advertisements must indicate that only those aged 18 and above are permitted to gamble. Advertisers’ profiles and websites must adopt available age restriction mechanisms (i.e., age gates);

• Responsible gambling principles and warning clauses must be included.

Conar has also published a guide summarizing Annex X (available in Portuguese) to facilitate operators’ and consumers’ understanding of the new rules.

Next steps

In order for interested companies may begin the authorization process, the Ministry of Finance must still publish regulations to cover provisions in the new law, including minimum eligibility requirements and authorization procedures.

In establishing conditions and deadlines, the Ministry must give companies already operating no less than six months to comply with the new rules.

For more information about this topic, please contact Mattos Filho’s Entertainment practice area.