Navigating the highs and lows of Brazilian regulated gaming
Brazil is recognised for being one of the world’s largest markets for any industry – and its gaming industry is no exception.
With all the attractions for foreign investors that global profile entails, newcomers to the market have also had to adapt quickly to a very dynamic and challenging jurisdiction. Following the opening of the licensing process at federal level in May 2024, the Brazilian regulator, the Prizes and Betting Secretariat of the Ministry of Finance (SPA/MF), has seen more than 400 gaming licence applications filed, with 78 licences (covering more than 180 brands) having been granted. This has been excellent news for the Federal Government given the BR30m ($5.5m) price tag for each licence. The Federal Government has also collected additional taxes and fees from ongoing betting activities since the opening of the regulated market on 1 January 2025, thereby contributing to reducing its fiscal deficit.
Unfortunately, the Federal Government’s thirst for collecting taxes is imposing an additional burden on licensed operators, since a Provisional Measure issued earlier this year will, if approved by Congress, see the tax on gross gaming revenue rise from the current 12% rate to 18%, as of October 2025 (it being noted that 18% had been the initial rate proposed by the Federal Government when the legislative process that culminated in the enactment of Law No. 14,790/2023 began but was ultimately negotiated down to 12%). This 50% increase could have a profound impact on operator revenues, thereby reducing advertising spend and contributing to increasing the black market (which does not pay any taxes), potentially responsible for 50% to 60% of the market.
To make matters worse, the Federal Government has since March this year also been studying charging more than BR12bn of taxes retroactively from 135 operators acting in the Brazilian market for the five years prior to the above-mentioned 1 January 2025 opening. If the Federal Government does indeed intend to move forward in this direction, it will certainly face many legal challenges from operators (which at the time accessed the Brazilian market from offshore jurisdictions) to avoid this additional cost. Such action was prompted by the activities of the Parliamentary Commission of Inquiry held earlier in the year to investigate the betting market (CPI das Bets) but that did not have its final report approved, where many Senators urged the Federal Government to take action to recover such revenues from the market. In addition to the above-mentioned challenges faced by enhanced taxes, licensed operators are also facing other challenges; (i) continued competition from the black market; (ii) potential restrictions on advertising; and (iii) increasing number of customer claims.
Channelisation is still a major issue in Brazil and the Federal Government is struggling to find effective tools to clamp down on the black market. While it has successfully managed to block more than 12,000 illegal websites, the black market will continue to thrive until effective payment blocks are imposed on financial transactions, mostly conducted by Pix. There is consensus in the market that black-market operators will only start to suffer when Pix transactions are effectively blocked. In this regard, rumours have it that the first PSPs transacting business with the black market are soon to be assessed and sanctioned by the SPA.
Challenges have also arisen in terms of advertising, with Bill of Law No. 2985/2023, which imposes restrictions on advertising by licensed operators, progressing at the National Congress, although without a set date for being duly approved. Operators infringing upon already established advertising standards have also started to be notified by the Public Prosecution Service and CONAR – the self-regulatory advertising watchdog.
Litigation lawyers have also been kept busy with a rising number of customer claims being brought by consumers against licensed operators in Brazilian courts, especially in Small Claim Courts (where the processing of claims worth up to 40 minimum salaries is expedited). This can be a nightmare for operators as such claims can surface anywhere in Brazil (given that they can be brought by customers in the city where they live) and apply Brazilian consumer legislation, which is very strict and is based on certain pillars. The first is the concept of strict liability, the second is that all providers in the supply chain are jointly liable towards the impacted consumer. The third is the possible reversal of the burden of proof where it is up to the service provider – as the defendant – to prove it did not contribute to the event of loss.
In addition to all the above, federal licence holders are also seeing more competition from the state. This is especially true for municipal licence holders, the legality of whom is still highly controversial despite continuing to proliferate across Brazil. While some municipalities have attempted to offer nationwide licences at prices as low as only BR5,000 (and have been the subject to enforcement measures by the federal regulator), most are providing new opportunities for operators willing to operate land-based video lottery terminals (VLTs). While these machines may look like slot machines (which are still prohibited in Brazil), they are technically different and are legally authorised to run instant lottery games. This has also prompted the regulator in the State of Rio de Janeiro (LOTERJ) to conduct a public consultation with a view to issuing regulations on the operation of VLTs within the state. It is no wonder, therefore, that the more than 5,000 municipalities are looking eagerly for new business opportunities arising in this market sector.
Despite the many challenges being faced in Brazil by licensed operators, the market continues to attract new licence applications, showing that there are still opportunities for those who persist in chasing success in this top gaming market. But circumstances are certainly increasing in difficulty.
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