After more than 70 years of prohibiting gambling, Brazil is regulating the market. But some fear the move might just kill “one of the best market opportunities”.
The Brazilian Chamber of Deputies has approved legislation to regulate online sports betting and casinos.
The main aim of the bill, voted through in mid-September, is to top up the country’s struggling budget with approximately 700 million reais (€129 million) in tax revenues and licensing fees, according to Finance Minister Dario Duriga.
But some fear that the plan will backfire.
Why legalising betting is a big deal in Brazil
Gambling in general was prohibited in Brazil in 1946, when casinos, betting shops and bingo halls were shut down. However, the game has started to change in the past five years.
In 2018, fixed-odds sports gambling was legalised in the country, allowing gamblers to bet on the outcome of sports events knowing exactly how much they stand to earn at the time of placing the bet.
However, former President Jair Bolsonaro’s administration (from 2019 to 2022) didn’t issue the necessary regulations to implement this law, so it never really came into practice.
In the meantime, Brazilians took matters into their own hands and started using foreign sports betting websites.
Doing so doesn’t carry a risk of breaking the law, either for the operators or by the gamblers, according to Neil Montgomery, founding and managing partner of Montgomery & Associados law firm, based in São Paulo.
These sites “are licensed overseas and their servers are also located overseas”, he explained.
For example, British bet365 is currently the most visited sports betting website in Brazil, reports the web traffic data aggregator Similarweb.
President Luiz Inácio Lula da Silva is now aiming to finish what started five years ago.
With online gambling thriving in the past few years, the Brazilian sports betting market is huge.
Brazil is third in the world for sports online gamblers, with 42.5 million unique users of sports betting websites, according to a study published in June by the marketing data and analytics company Comscore. The country stands behind only the US and the UK.
The law is therefore likely to have a significant effect on a booming market if it is to be approved by the Senate.
In addition to other measures, the new law would require any sports betting company operating in the country to have its headquarters in Brazil.
Montgomery sees the regulation of the market as a “positive development”, but the way in which the Brazilian government wants to do so might prove more of a hindrance than a help
‘Killing its golden egg’
The gambling operators would have to pay around €5.8 million for a three-year licence and face a “very high-level taxation”, according to Montgomery.
Taxes would be “18% of gross gaming revenue, in addition to the other taxes that companies normally pay in Brazil, bringing the total tax burden to above 30%”, he explained.
Revenue in the online gambling market in Brazil is projected to reach €1.86 billion in 2024, according to Statista Market Insights.
Having a regulated market by next year might earn the government an extra tax revenue worth millions, plus the licence and the mandatory monthly inspection fees.
The requirement for operators to be headquartered in the country would also be a significant cost driver.
“It doesn’t seem feasible”, Montgomery said. “Operators have vociferated that the costs of doing business in Brazil in this sector would be too high.”
As a result, the country with “one of the best market opportunities” in this field “could be killing its golden egg by introducing legislation that is too strict”, he added.
And it’s not just operators who would be unhappy, but players too.
For instance, since sports betting is being regulated as a form of lottery, its winnings will face the same taxes as lottery prizes. So, above €400, there will be a standard tax rate of 30%, which Montgomery considers a substantial “bite from the government”.
Furthermore, according to BNL Data, a Brazilian platform that provides information on the gambling industry, 19 of the 20 first-division football teams in Brazil are sponsored by betting websites, mainly foreign ones.
These online platforms will only be able to continue to operate and advertise in the country if they are licensed. And if the market regulation ends up being very unattractive to the betting sites and they do not apply for a licence, it would have a “catastrophic effect” on Brazilian football, Montgomery said.
“There could be financial problems for the clubs since many of them depend greatly on the sponsorship received from those types of operators”, he explained.
However, all is still up in the air. The bill of law is now being analysed by the Senate and so is still subject to change.
It remains to be seen whether Brazil’s roulette wheels will indeed spin again, even if only on a computer screen.
Source: Euronews
