Exploring the intricacies of Brazil's gambling license system is crucial as the global gambling industry eagerly anticipates formal approval of Brazil's regulatory framework.
Despite the absence of comprehensive regulations, online gambling already thrives in Brazil, accounting for over 20% of global online gambling traffic. Brazilian gamblers mainly use foreign or foreign-owned platforms due to the lack of local regulation. To capture this lost revenue, estimated at $1.5 billion in 2023, Brazilian authorities have introduced new regulations.
Brazil has a complex history of gambling regulation. It was popular until the 1940s when a presidential ban, likely driven by religious views, was imposed. State-owned lotteries were allowed in the 1970s, followed by horseracing betting in the 1980s and commercial bingo and slot machines in 1993. However, commercialized bingo was revoked in 1998, leaving only non-commercial games. Poker, considered a game of skill, has remained legal but unregulated. In 2015, virtual and land-based instant lotteries were created. Discussions about sports betting regulation started in 2018, with a four-year timeframe given to implement a licensing regime, which later shifted to parliamentary consideration.
In March 2023, the Associação Brasileira de Defesa da Integridade do Esporte (ABRADIE) was formed to ensure a safe environment for online gambling in Brazil and protect against fraud and illicit activities.
Currently, Brazil's gambling laws are mostly uncontrolled, with only state-owned gambling forms like lotteries, horse racing, and non-commercial bingo being legal. Poker, fantasy sports betting, and games of skill are legal but lack regulatory oversight.
The new Brazilian gambling regulations aim to bring security, governance, and domestic-based companies into the market. This is motivated by the potential tax revenue, especially important as Brazil's economy has declined. Online gambling is projected to grow by 20% by 2027, making regulations and licensing crucial.
The responsibility for issuing gambling licenses in Brazil is scattered among various government agencies. The Ministry of Finance and ABRADIE will develop and regulate the new licensing structure.
Currently, there is no established eligibility criteria or application process for gambling licenses in Brazil, but these are expected to be introduced with the new regulations.
Ensuring compliance and protection from fraud and money laundering will be a significant challenge in the regulated Brazilian gambling market, with ABRADIE playing a key role in establishing regulatory compliance.
While there are currently no taxes or revenue allocation requirements, discussions about taxation rates are ongoing. Proposed licensing fees are set at BR$30 million (US$6.1 million) for three years, and operators must be headquartered in Brazil with a minimum capital of BR$100,000 (US$20,000). Online gambling operators will be taxed at 18% of Gross Gaming Revenue, with a portion allocated to social security and a sub-fund for public security. Players could face a 30% tax on winnings over BR$2,112 (US$430).
Introducing gambling regulations in Brazil comes with social and economic challenges. Ensuring player safety, responsible gambling measures, and protection from fraud and match-fixing are top priorities. Balancing profitability with safety is essential.
Brazil could learn from successful gambling licensing models in other markets like Ontario, Malta, and the UKGC. A well-defined application process and ongoing protection are crucial for a successful licensing framework.
As technology advances and online gambling grows, it's essential to establish clear licensing structures that address emerging risks, ensure user safety, and prevent abuse. Brazil's online gambling sector is expected to continue growing, potentially reaching $2.6 billion by 2026 with proper regulation.
The proposed changes and the introduction of a Brazilian gambling licensing system will usher in a new era for the industry, making it more accessible and safer. While this benefits the global iGaming industry, it may also impact countries and jurisdictions benefiting from Brazilian online gambling traffic.
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Joseph Vrachimis CEO at BetConsultant.Cy