Executive Order enacted to regulate the sports betting market in Brazil

After more than 4 years of discussion, an Executive Order (the Provisional Measure Nº. 1.182) was published on July 25, 2023 in the Federal Official Gazette (DOU), in order to regulate sports betting. The purpose of this Provisional Measure consists in disciplining and updating certain aspects of this market in Brazil, also commonly known as bets, which in recent years has expanded exponentially and until then operated under a scenario of legal uncertainty.

In general terms, the new provisions regulates operators[1] of the Brazilian betting market, establishing regulatory, corporate, taxation, commercialization, and market promotion criteria, as well as the possibility of sanctions. It is worth highlighting:
(i) the taxation of the operating agents, who must pay contributions in the amount of 18% on the Gaming Revenue, which will be applied to the revenue obtained from the games played, subtracting the amounts related to the payment of prizes paid to winner and of income tax levied on the prizes;
(ii) the necessity of a license to explore betting as an economic activity – although there is no maximum limit of licenses, national or foreign legal entities duly established in the national territory must obtain authorization from the Ministry of Finance in order to be allowed to act as operating agents;
(iii) the prohibition of partners or shareholders, controllers or members of a control agreement in a fixed-odds lottery operator, from holding direct or indirect participation in the Brazilian Soccer Clubs (SAF) and professional sports organizations, in addition to being prohibited from acting as a manager of a Brazilian sports team; and
(iv) the obligation of the operating agent to promote informative actions to raise awareness among bettors.

In addition, the Provisional Measure Nº. 1.182 establishes that the Ministry of Finance will be responsible for the supervision of these activities, being authorized to request from the regulated agents technical, operational, economic-financial and accounting information, data, documents, certificates, attestations, and reports related to the activities developed. The unjustified refusal, omission, falsity, or delay in the provision of such information and documents shall be subject to a daily fine of R$ 10,000.00 (ten thousand reais), which may be increased up to 20 (twenty) times, if necessary, to ensure its effectiveness.

Parameters were also established for the prohibition of certain persons as bettors, being forbidden from betting: influential persons or employees of the operating agent; public agents with attributions directly related to the regulation of the betting market; persons under 18 years of age; persons who have or may have access to betting lottery systems; persons who may influence the outcome of the sporting event; and persons registered as debtors in default in the National Credit Protection Register.

This Provisional Measure is the first step towards the effective regulation of the betting market in Brazil, and it is important to understand that its approval by the National Congress and the regulation of the Ministry of Finance will still be necessary to for the full implementation of the new rules.  However, for the Federal Government, this is already being considered to be a first step towards an increase in tax revenue of approximately R$ 2 billion in 2024.

With the publication of the Provisional Measure, some rules are already in force, such as the prohibition for controlling shareholders of fixed lottery operators to hold direct or indirect participation in professional sports organizations, while other rules will take effect in a specific period of time. Nevertheless, this Provisional Measure must be approved within 120 (one hundred and twenty) days by the National Congress, in order to avoid losing its validity.

Our team is following developments on this matter and, if you wish to obtain more information regarding this subject, as well as advice on the betting market, we are available through the email felipe.monteiro@kasznarleonardos.com.