2024 was always bound to be an exciting year with the enactment of Law No. 14,790/23 (which further regulated fixed odds sports betting and legalised iGaming in Brazil) at the turn of 2023. However, no one could anticipate the thrills and challenges the industry would face prior to the official launch of the regulated market at federal level – set for 1January 2025.
The market started the year by cheering the enactment of the new law
President Lula’s vetoes of the provisions governing personal income tax payable by bettors were not well received, because it meant that operators would have to withhold players’ personal income tax at source. The consensus was this could end up being messy and unstimulating. Fortunately, the vetoes were overturned later in the year by Congress. The original provisions determined that players would calculate personal income tax once a year, when preparing their annual returns, at a rate of 15% of net winnings. Surprisingly, the Federal Tax Authority is yet to issue an ordinance determining the format and contents of the report, which operators will now have to deliver to their customers on an annual basis.
At the end of January 2024, the Ministry of Finance created the Prizes and Betting Secretariat (SPA), to become the federal body responsible for issuing the ordinances needed to regulate Law No. 14,790/23. It was expected that José Francisco Mansur, who had spearheaded the governmental efforts culminating in such law, was to step in as the head of the body. However, he departed from his leading position in mid-February, upon returning from ICE London. His right-hand man Simone Vicentini picked up the baton and was in charge for a couple of months before being succeeded by another lawyer – Regis Dudena – who was appointed at the end of April and remains in office at the time of writing.
The SPA had the mission of rolling out all ordinances required to regulate the many topics covered by Law No. 14,790/23. Despite initial skepticism, Secretary Dudena showed the market he was serious and kept his promise by delivering the full set of ordinances by the deadline of 31 July.
Of the ordinances issued, Ordinance No. 827/2024 was particularly important, as it laid out the federal licensing process; having established a transitional period that would end on 31 December. It is worth mentioning that, during this period, operators already accessing the Brazilian market were allowed to remain active. This ordinance specified when the first wave of licences were to be issued, and further detailed that applicants submitting their applications by 20Augustwould be included in this first wave if their applications satisfied all necessary requirements. In total, 113 applications were submitted before this important checkpoint, with more than 200 others (and counting) having been submitted since then.
It was around that time, however, that the industry started to face fierce criticism and opposition from many sectors of society and the economy. Brazilian public opinion started to point fingers at the industry as being responsible for losses in the retail and banking sectors, and for increasing rates of family debt. Even President Lula made public announcements strongly criticising the industry and hinting that if the regulations failed to do their job (in terms of protecting bettors and their families), he would see to the industry being closed.
Amid this turmoil, Secretary Dudena was pressured for action, and did so by issuing Ordinance No. 1475/2024, which cut the transitional period by three months for operators that had not applied for a licence by 17 September. It also announced that a whitelist of authorised websites would be issued at the beginning of October for applicant operators that informed the SPA by 30 September of their intentions to operate until 31 December. Currently 101 applicant operators have their websites indicated in such whitelist and, since October, thousands of unauthorised websites have been blocked by the Brazilian Telecommunications Agency (ANATEL), as requested by the SPA.
This frenzy also led to several Direct Unconstitutional Actions being filed with the Supreme Court, aiming to have the entirety of Law No. 14,790/23 (as well as Law No. 13,756/2018) being declared unconstitutional. Justice Luiz Fux was appointed as the rapporteur of these actions and scheduled a public hearing to be held in Brasília on 11 November, to hear all stakeholders involved. The outcome of the hearing was an order to anticipate the regulations on advertising, particularly ones designed to protect vulnerable persons and minors.
While such actions move forward (albeit with unconvincing legal arguments), the SPA is now gearing up to ride the first wave of federal licences issued by the end of December. These will be valid from 1 January 2025, the official launch of the federal regulated market.
The question then becomes: what can we expect in 2025?
For starters, everyone is waiting to see how many of the 113 operators that applied for a federal licence by 20 August will actually make it to the finish line. With some having pulled out from the process and many others likely not satisfying all the requirements (including the payment of the hefty R30m ($5m) licence fee), speculation has it that the initial number of licensed operators will be around 80. However, it is again worth noting that each operator can exploit up to three brands per license.
One positive feature for 2025 (which has already been witnessed this year – in instances such as the acquisition by Flutter of a 56% stake in the NSX Group – the owner of Betnacional), is something I had envisaged in January 2024 when discussing Law No. 14,790/23. Indeed, it is an increasing number of M&A and joint venture transactions. In the context of the foregoing, many applicants are said to have applied for a licence to monetise the work put into obtaining a federal licence, valid nationwide.
The market also awaits to see how much channelisation the abovementioned legal framework will secure in the Brazilian regulated market, alongside what measures the Brazilian Federal market, besides blocking illegal websites. The blocking of PIX payments appears to be the best tool. Another recent trend is the onshoring of foreign B2B providers, which has been triggered by licensed operators urging their suppliers overseas to incorporate Brazilian subsidiaries so that they can be invoiced locally.
This method seeks to avoid exposure to forex oscillation and heavy tax burdens when paying invoices issued by foreign companies. It also provides local operators (and also bettors) with greater protection from a consumer law perspective, since all agents in the supply chain share joint liability for any damages caused by their offerings to the Brazilian market. It is in the consumer market that operators (especially subsidiaries of foreign newcomers) will face one of the most daunting experiences of doing business in Brazil: extensive litigation in the form of consumer claims.
Indeed, the applicable to the relationship established between operators and bettors, adopts the concept of strict liability and allows plaintiffs (consumers) to take legal action where they live (as opposed to doing so in the judicial district where the defendant [operator] is headquartered), as well as the potential reversal of the burden of proof. This means there will be a proliferation of consumer claims nationwide, including ones that may potentially try to recover damages from operators incurred prior to 1 January 2025 (when operators accessed the Brazilian market from overseas).
Legal issues will likely arise from this fledgling industry hiring a new category of workers not yet recognised by the Brazilian legal framework, and in relation to which there are currently no specific unions
Therefore, it is needless to say gaming lawyers across Brazil will be kept very busy well into the New Year, which, hopefully, will see a strong regulated market being launched – after a wait that has spanned decades.
