Brazil's President Bolsonaro renews authorities, to introduce regulatory decree for sports betting

Brazil continues to be the talk of the gaming sector, not only because the possibility of approving a comprehensive gaming law in the Senate in 2022 is still far off, but also because a decree that will regulate sports betting at a local level is expected to be published next week.

According to a report by Games Magazine Brasil (GMB), the Ministry of Economy is expected to announce this week Iuri Ribeiro Castro as the successor of Waldir Eustáquio Marques Júnior, who will leave his position as head of the Undersecretary of Awards and Sweepstakes.

Castro has extensive experience in the industry since 1990 and has held the position of General Coordinator of Lottery Regulation at the Ministry of Economy since October 2021.

The unveiled changes would somehow anticipate President Jair Bolsonaro's signature of the decree regulating sports betting, an announcement that is expected to be made after May 10.

According to a document published by Games Magazine Brasil, the operation of sports betting will depend on the authorization of the Federal Executive Power, with no limit on the number of authorizations, and will be carried out by private legal entities that offer the service to bettors all over the country.

The decree is expected to determine that the model to be adopted is the authorization model, in which the applicant must submit a request to operate. The responsibility for authorizing, regulating, supervising, and inspecting sports betting will fall on the Ministry of Economy, although the document does not mention the agency that will hold said authority.

Authorizations are expected to be granted in record time: the regulator will have 30 days to analyze the documentation and will notify the interested parties to submit the final documentation. Within 60 days, the regulator must complete the analysis on the granting of the request.

Companies operating in Brazil at the time of the decree's publication will have conditions and deadlines 'of no less than six months to comply with the provisions of the legal document'. The document also states that the authorization will be valid for five years, and in order to obtain it, the decree requires a prior payment of 22.2 million reais in fees (about US$ 4.42 million).

The project of Law stipulates the documents that must be submitted to the regulator to obtain the operating authorization include a technical qualification test, the provision of bank or financial guarantees, and the international certification of its systems, among others.

In order for foreign companies to operate in Brazil, they must also have a branch office in the country, as well as sufficient capital and economic and financial capacity to support the activity they are to carry out. In addition, they must appoint at least four professionals from the company to manage the operation.

The decree defines issues such as the deadline for the payment of the awards, the conditions for the collection of social security contributions, and the amounts related to social transfers, as well as the collection of income tax on the awards.

The rate of income tax is not indicated in the decree, as it only states that it will be levied on "winnings", in the sense that "the difference between the amount of the prize minus the bet or the sum of the prizes, minus the sum of the bets, in case of identical bets placed on the same event".

It is also stated that in both physical and virtual bets, the ID of the person placing the bet, on behalf of himself or of a third party, will be required, including the Individual Taxpayer Registration Number (CPF) and, in the case of a foreigner, the passport or official identification document, the country of residence of the foreign bettor and his/her Taxpayer Identification Number (NIF).

The wording in the decree also mentions issues such as the promotion of informative and preventive actions to raise players' awareness and prevent gambling addiction, through the development of codes of conduct and the dissemination of good practices. Among other measures, the operator must obtain international certifications on responsible gambling and sporting events must have actions to prevent the manipulation of results.

The document submitted to GMB also states that the operator will have to prove to the Ministry of Economy, prior to beginning the marketing of bets, that it is a member of or has a contractual relationship with international sports integrity control organizations. Its operation will be conditional on the adoption and application of these policies, procedures, and internal controls, designed to prevent money laundering and the financing of terrorism, and to basically avoid fraud.

The document, which addresses art. 29 of Law 13.765/2018, defines the activity as an "exclusive public service of the Union, operated exclusively in a competitive environment, throughout the national territory", and fixed-odds betting is defined as a "lottery modality consisting of a betting system related to real sports-themed events, in which it is defined, at the time of the bet, how much the bettor can win in case of a correct prediction".

Decree 11.036/22, which restructures the Ministry of Economy, defines that the Secretary of Evaluation, Planning, Energy, and Lottery will no longer be part of the Special Secretariat of  Treasury and Budget (SETO), and will become part of the Special Secretariat of Productivity, Labor and Competitiveness (SEPEC), led by Daniela Marques Consentino.

Within SEPEC, the Competition Advocacy Department, managed by Geanluca Lorenzon, will be in charge of the new Special Affairs Department, Lottery and Export Processing Zones, responsible for regulating, authorizing, and supervising all lottery modalities, among other things.

The complete document in Portuguese is available for download.