Brazil will require sports betting companies to be headquartered in the country

Brazil is set to require sports betting firms to be headquartered in the country in order to operate there, in addition to creating oversight mechanisms to curb fraud and manipulation of match results, the finance ministry said on Tuesday.

"The regulation will require that betting companies are based in Brazil," the ministry said in a statement retrieved by Reuters, as most are based abroad, as well as "improving the supervision, collection and dialogue with the agents that operate in the sector." It is yet unclear if opening a locally-headquartered subsidiary is enough for foreign firms to meet the requirement.

A law passed in 2018 allowed betting companies to operate in the country and they have surged in popularity since then. However, the government says loose regulation has allowed the business to grow untaxed and lawless. The new plans, which include taxing the firms, are part of an effort announced by Finance Minister Fernando Haddad last week to boost fiscal revenue.

"Lack of regulation and collection of taxes also caused Brazil to fail to structure and maintain a monitoring network of suspicious behavior," the ministry added as per the cited source, saying it hopes the reform can help crack down on money laundering, manipulated results and help penalize those responsible.

Two ministry sources said the measure could bolster public accounts by some 2 billion reais to 8 billion reais ($385 million to $1.54 billion) annually, though the calculations have not yet been finalized. The ministry did not say how the business would be taxed or what the rates might be.

Cristiano Maschio, CEO of online gambling servicer Qesh, says some 12 billion reais is expected to change hands in sports betting this year, with more than 36 million people predicted to visit Brazil's betting sites. According to government data, between 450 and 500 companies currently operate in the betting sector in the country.

Last week, Haddad said the government could start regulating online games this same month to collect income and compensate for the changes made in the Income Tax (IR). ”We readjusted the IR (Income Tax) table, and this generated a small loss in collection. We will compensate with the taxation of these electronic games, which do not pay any tax and take a fortune of money from the country,” said the minister in an interview with UOL.