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Online Gaming in Brazil

Authored by - Montgomery & Associados (Last Updated Jul 2023)

Overview

Restricted

Brazil Online Gaming Overview

Unregulated
In Brazil, games of chance are defined by article 50 of the Criminal Contraventions Law of 1941 (as subsequently amended) as games in which luck has an exclusive or preponderant influence on the outcome of the game. The establishment or exploitation of such games of chance in a public place, or accessible to the public, with or without payment of an entrance ticket, is considered a criminal contravention (misdemeanour). The most conservative approach, in the light of the current legislation, would be that online gambling would be illegal based on article 50 of the Criminal Contraventions Law. This is especially true after 2015, when such article was amended to specify that players betting online are equally subject to the payment of a fine.

However, in a judicial proceeding which we have had access to, the Brazilian Federal Police issued an opinion regarding the relationship established between a foreign online gaming operator (bet9) and Brazilian customers, stating that since its website was not hosted in Brazil, the Criminal Contraventions Law would not apply extraterritorially, given that Article 2 of the Criminal Contraventions Law determines that it is applicable only to wrongdoings practised in Brazil, and further concluding that Brazilian customers accessing gaming and lottery websites hosted outside the Brazilian territory should not be prosecuted under the Criminal Contraventions Law. In addition, since foreign gaming companies are not incorporated in Brazil and are fully registered, authorized and licensed to conduct online gaming activities in their host countries, the Federal Police considered that any attempt by Brazilian law enforcement authorities to enforce such legislation against them would fail.

This is one of the first (if not the only) legal precedents we have come across confirming that the Criminal Contraventions Law would not have extra territorial application, thereby not reaching foreign gaming and betting operators duly licensed to exploit such activities from their countries of origin. This is despite the discussion to the contrary of this and the law having been amended in 2015 to expressly contemplate that players betting online would be deemed to be committing a criminal contravention (misdemeanour). From a Brazilian criminal law perspective, therefore, unless additional specific criminal legislation is enacted stating otherwise, foreign online gaming operators and Brazilian customers will probably not be prosecuted under the Brazilian Criminal Contraventions Law.

On the legislative front, Bill of Law No. 442/1991 is the most extensive and ambitious gambling-related Bill currently in progress at the National Congress. Such Bill seeks to legalise various forms of games of chance, such as casino, bingo and jogo do bicho, both online and land-based, as well as extend the existing operation of horse racing betting. This Bill was approved by the House of Representatives on 24 February 2022. However, the Brazilian legislative process dictates that the Bill must now be reviewed by the Federal Senate, to which it was referred on 4 March 2022 for further progress. Since then, the Bill has not been receiving the same attention in the Senate as it did in the House of Representatives, given that so far Rodrigo Pacheco, President of the Senate, has not decided what procedure the Bill should follow and, therefore, no rapporteur has been appointed. It was expected that the Bill would not be voted upon until the end of 2022, after the Presidential elections occurred in October. However, unfortunately, this did not happen. Such expectation had been fostered since April 2022, when Deputy Felipe Carreras, rapporteur of the Bill at the House of Representatives and who integrated the “transition team” formed by the new-elect President Lula, met with Rodrigo Pacheco to discuss the progress of the Bill. Reportedly, Rodrigo Pacheco would have promised to table the Bill for a vote still in 2022. In June 2023, Rodrigo Pacheco forwarded Bill of Law No. 2234/22 (which is the new number attributed to BL No. 442/1991) to be reviewed by the Constitution, Justice and Citizenship Committee (CCJ). While the bill of law is progressing slowly, it is indeed progressing within the Senate. We recommend you stay tuned to any developments on the Bill in the upcoming months.

Further, there is also a claim arising from the State of Rio Grande do Sul awaiting judgment by the Brazilian Supreme Court (STF). This argues that the provisions of article 50 of the Criminal Contraventions Law, which predates the Federal Constitution of 1988, became unconstitutional upon the enactment of the Federal Constitution. This case has been recognised as being of “general public interest”, which means that its decision will be a binding precedent on all lower courts. The judgement session, which had been scheduled for 7 April 2021, has been postponed indefinitely.

Therefore, we could see the lifting of the restrictions on gambling in general in Brazil without any regulation. Furthermore, and in the context of such leading case, all judicial proceedings regarding this matter have been suspended until the leading case is decided by the STF.

Market Size
Brazil has been described as a sleeping giant with no formal regulation, but the grey market continues to attract large providers such as bet365 and Entain.

Competitive Landscape
See general overview section above.

Localisation
See general overview section above.

Top Key Attractions and Challenges
Attractions
Since the legalisation of fixed-odds sports betting in 2018, online sports betting has only attracted more and more Brazilian players. This is because, since then, offshore operators have enjoyed a great deal of leniency from Brazilian authorities, whereas the market has been eagerly waiting the regulation of this activity. During this period, operators have widely promoted their brands in Brazil and have already been integrated into Brazilian life. It is unlikely that sports betting and online gambling will not prevail in Brazilian society from now on. This scenario demonstrates the strength of the Brazilian sports betting market, to the extent that, despite the absence of any land-based operation, sports betting is already extremely popular and is increasingly becoming part of the Brazilian people’s culture.

Challenges
At the moment, it appears that President Lula’s attitude towards the legalisation of games of chance and the Bill, seams positive, given that he envisages this as an excellent opportunity to collect more taxes to fund his social programs.

On the other hand, although Lula may not be in a position to act on the legalisation of games of chance, the recently elected senators and deputies are mostly allied with current President Jair Bolsonaro. Thus, except for those who integrate the evangelical wing, it may be that the majority of Congress is more aligned to a liberal economic agenda and end up being facilitators of the legalisation process. This scenario could benefit the progress of the Bill in Congress, especially now that President Bolsonaro will no longer be in power to veto it. Unfortunately, the safest course of action is to wait for the beginning of Lula’s mandate and the next legislature to better determine what will be the fate of Brazil’s gambling legalisation efforts.

In May 2023, the Ministry of Finance had prepared a Provisional Measure providing for penalties and sanctions for sports betting operators, to be applied in the future for those who do not comply with the regulations. All rules regarding the licensing procedure and other market restrictions to be observed by operators was expected to be issued by the Ministry of Finance during 2023, after a few rounds of public consultations.

Despite classifying sports betting regulation as a priority due to its promissory tax collection, the Federal Government has not yet decided when the Provisional Measure will be released. There are also rumours that the Provisional Measure will be split into two norms and be published before the Congressional recess on 17th July 2023, namely: a Provisional Measure addressing the tax and penalties and a bill of law to be processed with constitutional urgency for the creation of a regulatory body for the industry, which is being negotiated between Lula’s allies, Arthur Lira and Rodrigo Pacheco.

Licensing & Regulation

Onerous regime / Unregulated (Restricted)

Brazil Online Gaming Licensing & Regulation

Since Bill of Law No. 2234/22 (previously BL No. 442/1991) is still being reviewed by the Constitution, Justice and Citizenship Committee (CCJ)  and the regulations on fixed odds sports betting have not been issued by the Federal Government, there is no licensing regime in place. Therefore, no licences are currently available at Federal level.

Following the STF ruling ending the...

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Enforcement

Light touch

Brazil Online Gaming Enforcement

Regulating bodies
No, there is no Regulator. However, online sports betting companies are indeed subject to CONAR and Consumer Protection authorities, such as PROCON, even if operating from overseas.

Supervision by Regulator
N/A

Enforcement against licensed operators
Currently, there are no licensed operators in Brazil. However, in the future, if a local licensed operator of fixed-odds sports...

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Marketing

Restricted

Brazil Online Gaming Marketing

Offline:
Radio & TV broadcast, print, SMS, sponsorship
The Criminal Contraventions Law contains several marketing prohibitions. Further, the Brazilian advertising market is self-regulated and has its self-regulatory body, CONAR, which has oversight power and may order that certain campaigns be taken off the air. CONAR prohibits the advertisement of unauthorised games of chance or of any form of...

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Fees

Low

Brazil Online Gaming Fees

In light of previous comments, there are currently no specific fees, as licences are not yet available.

Application fees
N/A

Ongoing fees
N/A

Any required minimum guarantee
N/A

Capitalisation requirement
N/A

The current expectation is that the Federal licence will be made available and the licence fee would be BRL 30 million.

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Taxes

High

Brazil Online Gaming Taxes

Most gambling activities are illegal and are not currently being taxed. This is what the numerous bills of law (that are currently underway at Congress) aim to reverse. For those activities that are legal, there are several federal and municipal taxes that may be applicable.

Licence taxes
N/A

Sales taxes
VAT on Sales and Certain Services (ICMS), Excise...

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Future Outlook

Uncertain

Brazil Online Gaming Future Outlook

Legislative advancement is slow and intricate in Brazil, and there is still fierce opposition at Congress and within certain sectors of society to the legalisation of gambling altogether.

There were high expectations that by the end of 2022 there would be significant developments to gambling laws and regulations, so that the wider legal and regulatory environment relating to games of...

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Legal Expert

Montgomery & Associados

Office locations Brazil (São Paulo / Rio de Janeiro)

Montgomery & Associados is a Brazilian law firm with a dedicated Minds Sports, Draws, Gaming, Betting and Lottery Practice Group. It pioneers the innovative business model of Lean Full Service – LFS® and is the only Brazilian full-service law firm with a dedicated team specializing in gaming and betting. Neil Montgomery, founding and managing partner and practice group head represents Brazil as a General Member at IMGL, is a published author and a regular speaker at international gaming and betting events. He has worked as a lawyer in London and São Paulo and specializes in advising multinational companies in investing and doing business in Brazil and Brazilian companies expanding their businesses overseas.

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